Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments February 21, 2023 erstellt
Description:
On August 2017, the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU) is intended to improve accounting for hedging activities and enhance derivative usage transparency. In this paper, I examine whether banks change the accounting designation of derivatives after ASU 2017-12. Moreover, I investigate the new standard's impact on earnings volatility within different groups of derivative users. I split the sample banks into hedgers and non-hedgers based on using derivatives for hedging purposes. Using detailed quarterly data on financial derivatives for bank holdings, my results show that the level of earnings volatility and the ASU 2017-12 influences the banks' decisions to use hedge accounting. In assessing the impact within groups of derivative users, I find evidence that banks that designate derivatives for hedge accounting purposes exhibit a lower level of earnings volatility around the adoption of ASU 2017-12 as opposed to banks that elect not to apply hedge accounting. Furthermore, the differences in earnings volatility become more pronounced in the post-adoption period, whereas I failed to detect any differences in cash flow volatility among the two groups. I also find that banks that elect to use hedge accounting for the first time after adopting the standard update exhibit a decrease in earnings volatility. Overall, the findings confirm the FASB's initial intention to introduce the accounting standard's update