Accounting and Disclosure for Derivative Instruments (Portfolio 5112)

  • This Portfolio explains both how to account for derivatives and how to disclose transactions in derivatives.


Bloomberg Tax Portfolio 5112, Accounting and Disclosure for Derivative Instruments (Accounting Policy and Practice Series), explains both how to account for derivatives and how to disclose transactions in derivatives. The original source of most of these rules is FASB Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Transactions (FAS 133), and regulations promulgated by the Securities and Exchange Commission (SEC). The FAS 133 rules have been codified and now appear in FASB Accounting Standards Codification (ASC) Topic 815, Derivatives and Hedging. ASC 815 supersedes FAS 133; however, FAS 133 contains background information useful for understanding the FASB ASC rules on derivatives. For readers’ convenience, this Portfolio cities to both the FASB ASC and FAS 133.

For the benefit of readers seeking only an overview of the subject, Section I describes derivatives subject to ASC 815, transactions excluded from its scope, and disclosure requirements. Subsequent sections of the Portfolio describe these rules in detail. After introducing derivatives and explaining how the requirements developed, the Portfolio defines derivatives and explains the scope of instruments subject to ASC 815. How to account for derivatives then is explained. After analyzing the accounting rules, the Portfolio explains the disclosure requirements imposed by the FASB and the SEC, respectively. The Portfolio’s worksheets provide extensive sample documentation for establishing hedging relationships and set forth relevant professional standards and other source materials.

Focusing on ASC 815 and associated SEC rules, this Portfolio does not cover international accounting standards on accounting for derivatives. Readers interested in that topic should consult IASB International Accounting Standard No. 32, Financial Instruments: Presentation, IASB International Accounting Standard No. 39, Financial Instruments: Recognition and Measurement, International Financial Reporting Standard 7, Financial Instruments: Disclosure, and International Financial Reporting Standard 9, Financial Instruments. However, the principles set forth in this Portfolio may illuminate understanding of international accounting standards on derivatives.

This Portfolio may be cited as Bloomberg Tax Portfolio 5112, Johnson and Grossman, Accounting and Disclosure for Derivative Instruments. Ira Kawaller and Reva Steinberg contributed to this Portfolio the sample documentation for hedging transactions contained in Worksheet 11.

Note: Various FASB documents, copyright by the Financial Accounting Standards Board, 401 Merritt 7, PO Box 5116, Norwalk, CT 06856–5116, U.S.A., are reprinted with permission.

Table of Contents

Charles Borek
CEO & Chief Counsel
Borek Group LLC
Christian Johnson
Dean & Professor of Law
Widener University Commonwealth Law
Ira Kawaller
Kawaller & Co., LLC
Mary Grossman
Mary Grossman
Chapter 13
Reva Steinberg
Partner (retired)
BDO Seidman, LLP