While many will commend the FASB for mandating measurement in all circumstances, it seems odd to go the other direction by eliminating the highly effective criteria under the current quantitative assessment requirement. The FASB states that “eliminating the shortcut method and the critical terms match method would result in a more consistent model for assessing hedge effectiveness.”

When the FASB and the IASB started talking about the convergence of accounting standards back in 2006, the road map was pretty optimistic. Now the path to convergence is clearly widened further. No doubt its exposure draft issuance will coincide with the holiday period with comments due by September, so don’t forgot your laptop when your pack your suitcase.

Since FAS 133 was introduced nearly a decade ago and IAS 39 was introduced over five years ago, we continue to see differing interpretations of these standards being applied in the marketplace. A good example of this is the application of currency basis on Cross Currency Interest Rate Swaps (“CCIRS”) for effectiveness testing.