The Financial Accounting Standards Board issued its final standard on certain hybrid financial instruments last week, attempting to simplify accounting for those instruments and also advance the use of fair-value accounting.
The new standard, “Statement of Financial Accounting Standard No. 155, Accounting for Certain Hybrid Instruments,” is an amendment of FASB Statements No. 133 and 140. It allows financial instruments that have embedded derivatives to be accounted for as a whole, eliminating the need to carve out the derivative from its host—if the holder elects to account for the whole instrument on a fair-value basis.
