The Financial Accounting Standards Board’s decision to indefinitely postpone a proposed revision to its well-known complex accounting rules for derivatives is welcomed news for companies that use the instruments to hedge risk, according to FinancialWeek.
The FASB originally intended to simplify the rules, known as FAS 133, and eliminate differences that exist between them and their counterpart under International Financial Reporting Standards, IAS 139.
The decision means that companies will be able to continue to use “short-cut” methods to account for plain-vanilla interest-rate swaps, according to FW. Companies will also be able to separate the risks they’re hedging with a given instrument into expected changes in overall fair value or cash flows, interest-rate risk, credit risk, or a combination of those options.
FAS 133R would have required companies to buy another hedge to offset the hedge they were seeking to terminate.
The FASB is expected to revisit these issues once the Securities and Exchange Commission meets to decide whether U.S. companies can report their results in either U.S. GAAP or IFRS.
Until then, FAS 133R has been put to the side to be worried about at a later date.