The Financial Accounting Standards Board has finalized some minor changes to the Accounting Standards Codification in Update 2010-8. While none of them are expected to result in significant changes in accounting practice, clarifications regarding embedded derivatives and hedging may require some close attention.

The changes represent minor updates to accounting rules to eliminate things that are outdated, to shore up inconsistencies, or to clarify the original intent behind a given requirement. FASB says the changes are “generally non-substantive in nature,” though they affect a number of broad topics within the Codification, including the statement of cash flows, changing prices, investments, intangibles, consolidation, non-monetary transactions, income taxes, business combinations, derivatives and hedging, and reorganizations.

FASB is calling special attention to the changes to derivatives and hedging rules, under Topic 815 in the Codification, because the changes may cause entities to rethink how they currently apply the rules. The new guidance likely will drive entities to think about whether embedded derivatives must be accounted for separate from the host contract into which they are embedded. As such, that may lead to some analysis regarding whether the entity may want to elect the fair-value option for measuring those contracts, FASB said.

The amendments generally are effective for annual reporting periods beginning after Dec. 15, 2008, which means the 2009 reporting year for calendar-year-end companies. However, FASB is allowing companies to adopt the derivative and hedging amendments for the following year to facilitate any transition companies may undertake.

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