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This chapter addresses the scope exceptions in ASC 815, Derivatives and Hedging. Certain contracts that meet the definition of a derivative are not accounted for as derivatives because they qualify for a scope exception. In providing scope exceptions, the FASB’s goal was to prevent ASC 815 from being unduly burdensome to certain industries and markets in which contracts to purchase and sell financial instruments and nonfinancial assets often meet the definition of a derivative but traditionally had not been treated as such.
Contracts that meet the definition of a derivative that do not qualify for a scope exception should be recognized and subsequently measured on the balance sheet at fair value in accordance with ASC 820, Fair Value Measurement. If a derivative is not designated as a hedge, changes in its fair value are recorded in current earnings. The accounting treatment of a derivative designated as a hedge depends on the type of hedging relationship.
Guidance specific to financial, nonfinancial, and foreign currency hedges are addressed in DH 6, DH 7, and DH 8, respectively.
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