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Derivatives disclosure: Will it tame the beast?
A broad overview is presented of some of the issues regarding disclosures of derivatives and the controversy surrounding the accounting treatment of derivatives that regulators are currently grappling with. There are 2 fairly distinct aspects related to financial reporting of derivatives: disclosure...
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Published in: | Journal of performance management 1996-01, Vol.9 (3), p.48 |
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Main Author: | |
Format: | Article |
Language: | English |
Subjects: | |
Online Access: | Get full text |
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Summary: | A broad overview is presented of some of the issues regarding disclosures of derivatives and the controversy surrounding the accounting treatment of derivatives that regulators are currently grappling with. There are 2 fairly distinct aspects related to financial reporting of derivatives: disclosure and accounting treatment. SFAS 119, Disclosure About Derivative Financial Instruments and Fair Value of Financial Instruments, greatly increased the disclosure requirements for derivatives activity and called for a more detailed explanation of why a company uses derivatives. Current accounting guidance for derivatives is inadequate and inconsistent and does not cover many derivative product types. It is the sheer variety and diversity of derivatives that leads to difficulties in establishing standard procedures to account for these instruments. A FASB proposal would particularly hurt banks, financial institutions, and brokerage houses that use swaps, options and futures, and forwards to hedge interest and exchange rate changes. |
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ISSN: | 1949-971X |