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Securities

November 11, 1994|From Times Staff and Wire Reports

New Derivatives Rule Proposed: The Financial Accounting Standards Board has drawn up a proposal to simplify reporting of derivatives when they are used to hedge the risk of loans or other investments. The accounting industry's rule-making group asked its staff to generate a proposal that could be sent out for comment in the first quarter of 1996. The plan drew strong opposition from bankers, who said it would cause volatility on their balance sheets. Derivatives are complex financial contracts that enable corporations to minimize the risk of sudden changes in interest rates, foreign currency values and other market variables. Conventional accounting standards never envisioned the rapid spread of derivatives used by corporations.

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