This chapter addresses relevant considerations in the application of hedge accounting for financial instruments under ASC 815, Derivatives and Hedging. This chapter assumes that an entity has adopted ASU 2022-01.
This chapter disaggregates hedges of financial instruments based on whether the coupons are fixed or variable rate and provides the eligibility criteria and recognition guidance for each type of hedge. This chapter also addresses the portfolio layer method for hedges of closed portfolios of certain financial assets. Finally, it addresses the interaction between the application of hedge accounting and impairment for both fixed-rate and variable-rate financial instruments.
The concepts within this chapter should be applied in conjunction with information in other chapters in this guide, including:
  • Introduction to hedge accounting and documentation requirements for all hedges (DH 5)
  • The application of hedge accounting to foreign-currency-denominated assets and liabilities or transactions and hedges of net investments (DH 8)
  • Effectiveness assessments (DH 9)
  • Discontinuance of hedge accounting (DH 10)
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