The Financial Accounting Standards Board issued an update to accounting standards to clarify new pronouncements on credit losses, hedging, and recognition and measurement of financial instruments.

FASB has issued three major standards in recent years that establish new methods of accounting for financial instruments. ASU 2016-13, now codified in Accounting Standards Codification Topic 825, established new requirements on measuring and recognizing financial instruments in financial statements. ASU 2017-12, codified in ASC 815, simplifies hedge accounting and more closely aligns accounting requirements with the ways companies use derivatives to manage risk. ASU 2016-13 on credit losses, Topic 326, requires companies to adopt a “current expected credit losses” approach to report the state of debt-based financial instruments in their financial statements.

After issuing major standards on financial instruments, as well as revenue recognition and leases, FASB has been working with various stakeholders to monitor implementation activities and consider where it needed to clarify its guidance. “Through these interactions, the FASB identified areas of the guidance that require clarification and correction,” said FASB Chairman Russ Golden in a statement. The newest ASU on financial instruments makes a number of changes to make the guidance in those standards clearer to preparers.

Calendar-year public companies adopted the new standards on recognition and measurement in 2018 and had the option to adopt new hedging rules as early as 2018 as well. The CECL standard to address credit losses, however, is still pending. It takes effect Jan. 1, 2020, and entities, especially in financial services, have been preparing for the new approach for some time.

Some financial institutions have appealed to FASB to reconsider the CECL model or to delay its effective date so its effects on the economy can be more closely studied and considered. FASB recently determined it will not make any significant changes to the standard.

With respect to credit losses, the standard makes some clarifications to language on accrued interest, transfers between classifications or categories of loans and debt securities, and recoveries. On recognition and measurement, the new ASU clarifies requirements contained in conforming amendments and addresses reinsurance recoverables, interest rate projections, prepayment considerations, and selling cost estimates when foreclosure is probable. Around hedging, FASB updated language on partial-term fair value hedges of interest rate risks, amortization of fair value hedge basis adjustments, disclosures, and others.

At a recent conference of the Institute of Management Accountants, FASB member Marsha Hunt described the latest changes to financial instruments as “housekeeping items.” With respect to hedging, for example, “the intention is to make sure, if we’re providing relief from the old rules to make it easier to qualify for hedging, we wanted to make sure the words are clear,” she said.