FASB Outlines Fair Value Derivative Accounting

The Financial Accounting Standards Board (FASB) released its preliminary views on measuring financial derivatives at fair value yesterday. These views cover three areas:

>Types of financial instruments reported at fair value
>The definition of fair value
>Ways that changes in fair value can be reported

The impetus for the release is the trade body’s goal of giving investors a better understanding of companies’ holding of derivatives and their underlying assets. Soon, FASB will implement Financial Accounting Standard (FAS) 133 that requires companies to show the fair value of all derivative holdings.

This means that assets like cash, stocks and bonds and derivatives such as options and futures must be reported at their estimated fair or market value. FASB hasn’t yet decided how often this reporting will occur.

FASB wants industry feedback on its preliminary views and has set a May 31, 2000 deadline. Visit the Derivatives Implementation Group General Information page for more information.

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