FASB Publishes Special Report of the Joint Working Group of Standard Setters on Financial Instruments

Norwalk, CT, January 5, 2001—The business and investment environment has changed fundamentally 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. Because of those changes, traditional accounting concepts for the recognition and cost-based measurement of financial instruments need to be modified.

The Financial Accounting Standards Board (FASB) has published a Special Report prepared by the Financial Instruments Joint Working Group of standard setters (JWG) that addresses these issues and is soliciting comments by June 30, 2001. This Special Report recommends far-reaching changes to accounting for financial instruments and similar items. These changes 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 derecognized, while other parts continue to be recognized; and
  • Expansion of disclosures about financial instruments, financial risk positions, and income statement effects.

Commenting on the importance of the JWG in improving accounting for financial instruments, James J. Leisenring, a JWG member and Director of International Activities of FASB, stated, "It is our hope that this draft will provide the basis for informed comment from interested parties and for rigorous analysis and field testing."

Although this report is not a formal part of an FASB project and the Board has not deliberated the conclusions, this Special Report is related to the Board's current project on reporting financial instruments at fair value. Standard setters in the countries represented in the JWG are publishing the Special Report at approximately the same time. Comments received will be shared among all of those organizations unless respondents specify otherwise.

The JWG was formed in 1997 for the purpose of developing a coherent framework for accounting for financial instruments measured at fair value. The JWG 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 United States, as well as the International Accounting Standards Committee. The positions taken in the Special Report reflect the views of a majority of the members of the JWG. They do not necessarily represent the view of the organizations, including the FASB, that nominated the members of the JWG.

A single copy of the Special Report may be obtained free of charge during the comment period by writing to the Order Department, FASB, 401 Merritt 7, P.O. Box 5116, Norwalk, CT 06856-5116. The Report also will be available in mid-January 2001 on the FASB Web site at

About the Financial Accounting Standards Board

Since 1973, the Financial Accounting Standards Board has been the designated organization in the private sector for establishing standards of financial accounting and reporting. Those standards govern the preparation of financial reports and are officially recognized as authoritative by the Securities and Exchange Commission. Such standards are essential to the efficient functioning of the economy because investors, creditors, auditors, and others rely heavily on credible, transparent, and comparable financial information. For more information about the FASB, visit our Web site at