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US derivatives users cheer hedge accounting rejig

Novations will not automatically trigger de-designation of hedge accounting treatment, says FASB

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Derivatives used as hedges won't lose favourable accounting treatment if a user novates a trade to another counterparty

Market participants are cheering a fix to US accounting rules that ensures derivatives used as hedges won't lose favourable accounting treatment if a user novates a trade to another counterparty. International standard-setters have no plans to make a similar clarification, however.

The US Financial Accounting Standards Board (FASB) issued an update on the effect of derivatives contract novations

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