A PDF version of this publication is attached here: Derivatives & hedging guide - March 2024 (PDF 5.76mb)
PwC is pleased to offer our updated Derivatives and hedging guide. It provides guidance on the accounting for derivatives and hedging.
The FASB first issued its comprehensive standard on the accounting for derivatives and hedging in 1998. Since then, it has been amended numerous times, including a significant amendment issued in August 2017.
  • DH 1DH 4 discuss derivatives, including the definition of a derivative in ASC 815, Derivative Instruments and Hedging Activities, scope exceptions to ASC 815, and guidance on embedded derivatives.
  • DH 5DH 9 address the requirements for applying hedge accounting and provide guidance on the specific requirements for hedges of financial, nonfinancial and foreign currency risk, and the recognition and measurement of the hedged items and hedging instruments.
  • DH 10 discusses the discontinuance of hedge accounting.
  • DH 11 discusses guidance specific to private companies.

Discussion of presentation and disclosure requirements is included in FSP 19.
This guide assumes adoption of ASU 2022-01, Derivatives and Hedging (Topic 815), Fair Value Hedging – Portfolio Layer Method.
This guide summarizes the applicable accounting literature, including relevant references to and excerpts from the FASB’s Accounting Standards Codification (the Codification). It also provides our insights and perspectives, interpretative and application guidance, illustrative examples, and discussion on emerging practice issues.
This guide should be used in combination with a thorough analysis of the relevant facts and circumstances, review of the authoritative accounting literature, and appropriate professional and technical advice.
References to US GAAP
Definitions, full paragraphs, and excerpts from the FASB’s Accounting Standards Codification are clearly labelled. In some instances, guidance was cited with minor editorial modification to flow in the context of the PwC Guide. The remaining text is PwC’s original content.
References to other PwC guidance
This guide provides general and specific references to chapters in other PwC guides to assist users in finding other relevant information. References to other guides are indicated by the applicable guide abbreviation followed by the specific section number. The other PwC guides referred to in this guide, including their abbreviations, are:
  • Business combinations and noncontrolling interests (BCG)
  • Consolidation (CG)
  • Fair value measurements (FV)
  • Financial statement presentation (FSP)
  • Financing transactions (FG)
  • Income taxes (TX)
  • Insurance contracts (IG)
  • Loans and investments (LI)
  • Reference rate reform (REF)
  • Utilities and power companies (UP)

Summary of significant changes
Following is a summary of recent noteworthy revisions to the guide. Additional updates may be made to future versions to keep pace with significant developments.
Revisions made in March 2024
  • References to LIBOR in DH 1, DH 5, DH 6, DH 8, DH 9, and DH 11 have been updated as LIBOR ceased to be published on June 30, 2023.

DH 2, Definition of a derivative
  • Additional discussion was added in DH 2.4 on the initial accounting for derivatives not designated in hedge relationships.
  • Example DH 2-1 was added to illustrate the accounting for the purchase of an interest rate cap.
  • DH 2.4.1 was added to discuss the accounting for modifications to derivative contracts.

DH 8, Foreign currency hedges
  • Guidance on net investment hedges that use a floating-for-floating cross currency interest rate swap as the hedging instrument following reference rate reform in DH was clarified.

DH 11, Derivatives – private company guidance
  • Guidance on whether the simplified hedge accounting approach is available for hedging relationships that reference SOFR was added in DH 11.2.3.

This publication has been prepared for general informational purposes, and does not constitute professional advice on facts and circumstances specific to any person or entity. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication. The information contained in this publication was not intended or written to be used, and cannot be used, for purposes of avoiding penalties or sanctions imposed by any government or other regulatory body. PricewaterhouseCoopers LLP, its members, employees, and agents shall not be responsible for any loss sustained by any person or entity that relies on the information contained in this publication. Certain aspects of this publication may be superseded as new guidance or interpretations emerge. Financial statement preparers and other users of this publication are therefore cautioned to stay abreast of and carefully evaluate subsequent authoritative and interpretative guidance.
The FASB Accounting Standards Codification® material is copyrighted by the Financial Accounting Foundation, 401 Merritt 7, Norwalk, CT 06856, and is reproduced with permission.
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