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Handbook: Derivatives and hedging

Handbooks | October 2023

Latest edition: Our in-depth guide on derivatives and hedge accounting, with our latest interpretations.

Using Q&As and examples, we provide interpretive guidance on derivatives and hedging. This October 2023 edition includes guidance on evaluating whether an embedded feature is bifurcated, amendments related to portfolio-layer method hedging, and other interpretations based on frequent questions we experience in practice.


ASC 815

  • Companies that have derivative instruments
  • Companies that have hybrid instruments
  • Companies that apply hedge accounting

Relevant dates

Effective date

Public entities

All other entities

Annual periods – Fiscal years beginning after

December 15, 2022

December 15, 2023

Interim periods – In fiscal years beginning after

December 15, 2022

December 15, 2023

Early adoption allowed in fiscal years beginning after

Permitted in any annual or interim period for any entity that has adopted ASU 2017-012

Permitted in any annual or interim period for any entity that has adopted ASU 2017-012

Key impacts

When the first comprehensive guidance on derivatives and hedge accounting was issued in 1998, the accounting requirements in this area were widely acknowledged as the most detailed and complex in US GAAP.

Since then, we have seen ongoing changes made to the requirements. For a long time, the changes added to the rules and complexity. But more recently, the changes have been focused on reducing operational burden, expanding the circumstances in which hedge accounting is permissible and better reflecting risk management practices.

Our objective with this publication is to help you navigate this complex area.  We provide you with insights, examples and perspectives based on our years of experience – so you can understand the requirements and, when options are provided, decide which alternatives are right for you.

Report contents

  • Scope of ASC 815
  • Definition of a derivative
  • Accounting for derivatives
  • Embedded derivative
  • General hedging requirements
  • Qualifying criteria and accounting for fair value hedges
  • Qualifying criteria and accounting for cash flow hedges
  • Hedging foreign currency exposures
  • Net investment hedges
  • Hedge effectiveness
  • Presentation
  • Private companies and entities that do not report earnings
  • Effective date and transition

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Derivatives and hedging

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Mark Northan
Partner, Dept. of Professional Practice, KPMG US
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Danielle Imperiale
Managing Director, Dept. of Professional Practice, KPMG US

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