The FASB has recently issued important new guidance with respect to hedge accounting.  The update, ASU 2017-12, is required to be adopted for fiscal years beginning after December 15, 2018.  It reduces the administrative burden, and related risk of potential restatements, in the following ways:

- Simplifies the criteria for using the "short-cut method" and "critical terms match"

- Allows for contractually specified risk-component hedging

- Allows for qualitative testing for "highly effective" hedges

- Removes the concept of hedge ineffectiveness

In the attached article, A&M's Chandu Chilakapati concisely summarizes the key points in ASU 2017-12, and provides implementation guidance that highlights the benefits of early adoption. It also provides important new information for hedgers of non-financial assets. Last but not least, it concludes by advising affected companies to begin their assessment of these new rules in early to mid-2018, to allow sufficient time to prepare for implementation.