Magazine article American Banker

FASB Rebuffs Business Elite Urging Delay of Risk Rule

Magazine article American Banker

FASB Rebuffs Business Elite Urging Delay of Risk Rule

Article excerpt

Despite mounting pressure from banks and other corporations, the Financial Accounting Standards Board is unlikely to retreat from a controversial derivatives proposal.

Senior executives from 22 major companies wrote to the rulemaking body last week urging it to slow down the new rules. The plan-proposed in June 1996 after years in the works-would require companies to record derivatives at fair market value on quarterly income statements.

But the FASB's top official was not moved by the plea.

"There is really nothing new in the letter we received," FASB chairman Edward L. Jenkins said in an interview Friday. "This project has been under way for four or five years, and it is important to the capital markets and investors to have more transparency and understanding about derivatives." In the July 31 letter to Mr. Jenkins and Securities and Exchange Commission Chairman Arthur Levitt Jr., both buyers and sellers of derivatives said the regulators are rushing without adequately considering the rule's effects, especially on risk management.

"We urge FASB to expose its new proposal for public comment," reads the letter, signed in part by the chief executive officers of Chase Manhattan Corp., Goldman Sachs & Co., and American International Group Inc.

"Costly and complex" new derivatives accounting rules would be tackled at the same time companies are dealing with year-2000 computer problems and the convergence of currencies in Europe, the executives also noted.

While bankers did not want to talk on the record Friday about prospects for change, privately they were pessimistic. …

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