Monday, September 15, 2008

Credit Default Swaps, Derivatives, Require More Disclosure In FASB Standard Issued Sept. 12

Amidst the news about Lehman’s filing for bankruptcy, the purchase of Merrill by BofA, and AIG being at risk, (see related statements of SEC, Federal Reserve and U.S. Treasury), we also read today “Credit-Swap Players Puzzle Over Fan-Fred Fallout - Lehman Situation Adds to Urgency to Settle Questions” [WSJ, by Serena Ng and Liz Rappaport.]

In related news, on Friday, Sept. 12, FASB issued an FSP requiring new disclosures about credit derivatives, including credit default swaps and certain embedded derivatives, (amending FAS 133 and FIN 45), and, more generally, clarifying the effective date of FAS 161 (disclosures of derivatives and hedging). These amendments are included in FSP FAS 133-1 and FIN 45-4, “Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161,” and further details are in this press release. The effective date of the proposed new disclosures for credit derivatives (the amendments to FAS 133 and FIN 45) is reporting periods (annual or interim) ending after November 15, 2008.

The clarification of the effective date of FAS 161,Disclosures about Derivative Instruments and Hedging Activities, is described as follows: “the FSP clarifies that the disclosures required by Statement 161 should be provided for any reporting period (annual or quarterly interim) beginning after November 15, 2008. For example, an entity with a March 31 fiscal year-end should provide the disclosures for its fourth quarter interim period ending March 31, 2009, in its 2009 annual financial statements.” The clarification was effective upon issuance of the FSP on September 12).

More FASB News Expected Today, And Roundup of Recent Announcements
We previously reported that FASB said it will release today its proposed amendments to its standards impacting securitization and consolidation. The proposals will impact consolidation of special purpose entities (SPEs), variable interest entities (VIEs), and qualified special purpose entities or QSPEs. We reported last week that FASB and the IASB released an update to their 2006 Memorandum of Understanding (MOU) on converging their two sets of standards, now planning to complete their major joint projects by 2011. Also, as we previously reported, FASB announced it will hold a webcast on application of FAS 157, Fair Value Measurement, on Sept. 29.
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