Because use and complexity of derivative instruments and hedging activities have increased significantly over the past several years, the Financial Accounting Standards Board (FASB) has issued FASB Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities, to require enhanced disclosures about derivative instruments and hedging activities. The new standard has revised financial reporting for derivative instruments and hedging activities by requiring more transparency about:
- How and why an entity uses derivative instruments;
- How derivative instruments and related hedged items are accounted for under Statement No. 133, Accounting for Derivative Instruments and Hedging Activities; and
- How derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows.
Statement No. 161 requires disclosure of the fair values of derivative instruments and their gains and losses in a tabular format. It also requires entities to provide more information about their liquidity by requiring disclosure of derivative features that are credit risk-related. Further, it requires cross-referencing within footnotes to enable financial statement users to locate important information about derivative instruments. Examples of the required disclosures are provided in the standard.
The new standard is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged.
Statement No. 161 is available in full at fasb.org. |
