FASB: Accounting For Financial Instruments.

The business and investment environment is fundamentally changing, due to advances in financial risk management and information technology, globalization of capital markets and accelerated use of sophisticated derivatives and other complex financial instruments. In light of the changes, the FASB has acknowledged that traditional accounting concepts for the recognition and cost-based measurement of financial instruments need to be modified.

The FASB has published a Special Report, prepared by the Financial Instruments Joint Working Group of standard-setters (JWG), addressing these issues, and is soliciting comments by June 30. Standard-setters in the jurisdictions represented by the group's members are publishing the document at approximately the same time. Although it's not a formal part of the due process in an FASB project, the Special Report does relate to the Board's current project on reporting financial instruments at fair value.

The Special Report recommends far-reaching changes that include:

* Measurement of virtually all financial instruments at fair value;

* Recognition of virtually all gains and losses resulting from changes in fair value of financial instruments in the income statement during the periods in which they arise;

* Elimination of special accounting for financial instruments used in hedging relationships;

* Adoption of a components approach under which parts of certain transferred financial assets are de-recognized, while other parts continue to be recognized; and

* Expansion of disclosures about financial instruments, financial risk positions and income statements.

The JWG was formed in 1997 for the purpose of developing a coherent framework for accounting for financial instruments measured at fair value. The group consists of nominees of accounting standard-setters or other professional organizations in Australia, Canada, France, Germany, Japan, New Zealand, five Nordic countries, the United Kingdom and the U.S., as well as the IASC. The report is available free of charge from the FASB's Order Department, or from its Web site at www.fasb.org.