Fair value hedging under the portfolio layer method in US GAAP

The new guidance issued by the FASB earlier this year allows entities to expand their use of what is now called the portfolio layer method (previously the last-of-layer method) for fair value hedges of interest rate risk in a closed portfolio of financial assets or one or more beneficial interests secured by a portfolio of financial instruments. The guidance also clarifies the accounting for fair value hedge basis adjustments in portfolio layer hedges and how these adjustments should be disclosed. Our Technical Line provides key accounting and financial reporting considerations for entities applying the new guidance.

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