A proposal from the Financial Accounting Standards Board would require companies to provide more information about the effects of derivative and hedging activities on financial statements.

The proposal comes in response to concerns that existing disclosure requirements, outlined in Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities,” do not provide adequate information to financial statement users.

The exposure draft requires that objectives and strategies for using derivative instruments are discussed in terms of underlying risk and accounting designation.

The draft would also require:

  • Tabular disclosure of notional and fair value amounts of derivatives instruments;
  • The gains and losses on derivatives instruments and related hedged items;
  • Disclosure of information about counterparty credit risk; and,
  • The nature of contingent features in derivative instruments.

The new requirements would be effective for financial statements issued for fiscal years and interim periods ending after Dec. 15, 2007, with early application encouraged.Written comments on the proposal will be accepted until March 2, 2007.

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