The Financial Accounting Standards Board issued an exposure draft of a proposed standard on accounting for hedging activities.

The proposed statement is intended to simplify hedge accounting and provide increased comparability of financial results for entities to apply hedge accounting. It would eliminate the multiple methods of hedge accounting currently being used for the same transaction. The proposed standard also would require an entity to designate all risks as the hedged risk (with certain exceptions) in the hedged item or transaction to better reflect the economics of such items and transactions in the financial statements.

The standard is intended to alleviate difficulties such as quantitatively assessing the effectiveness of hedging relationships, measuring ineffectiveness in a cash flow hedge, and measuring the change in value of a hedged item attributable to the risk in a fair value hedge. The proposed statement would establish a fair value approach to hedge accounting.

The amended hedging requirements would apply to fiscal years beginning after June 15, 2009, and interim periods within those fiscal years.

FASB is asking for comment on the proposed standard by August 15. For more information, visit

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