FASB Issues Hedge Accounting Guidance Adding Fed Funds Rate as Third Benchmark

NORWALK, Conn.—The Financial Accounting Standards Board July 17 issued a narrow-scoped accounting standards update—effective immediately—to include the Fed Funds Effective Swap Rate (OIS) as a third U.S. benchmark interest rate for hedge accounting purposes.
Specifically, the ASU amends Topic 815, Derivatives and Hedging, to allow OIS to be used for hedge accounting purposes, in addition to Treasury obligations of the U.S. government (UST) and the London Interbank Offered Rate (LIBOR).
The ASU also removes the restriction on using different benchmark rates for similar hedges, a summary of the guidance states. It is effective prospectively for qualifying new or redesignated hedging relationships entered into on or after July 17, 2013.