PwC DataLine Highlights New Disclosure Requirements for Credit Derivatives and Certain Guarantees

In September, the Financial Accounting Standards Board (FASB) issued a FASB Staff Position (FSP No. FAS 133-1 and FIN 45-4) that (1) introduces new disclosure requirements for credit derivatives and certain guarantees and (2) clarifies the effective date of FASB Statement No 161, Disclosures about Derivative Instruments and Hedging Activities (FAS 161). The new disclosure requirements are aimed at providing financial-statement users with similar disclosures for financial instruments with similar risks and rewards relating to credit risk, regardless of their legal form as a credit derivative or guarantee arrangement.

For some companies, the additional disclosures may be significant, particularly given the increased use in recent years of credit default swaps to manage and gain exposure to particular credit risks. The accelerated effective date of the FSP (required for annual and interim periods ending after November 15, 2008) and the clarification of the effective date of FAS 161 (required for annual and interim periods beginning after November 15, 2008) may also present challenges for many companies.

In DataLine 2008-25, PricewaterhouseCoopers (PwC) discusses the FSP and provides the firm's insight on applying it. The DataLine is available to members of the CFOdirect Network: http://cfodirect.pwc.com/CFODirectWeb/Controller.jpf?ContentCode=THUG-7KHHZ4&ContentType=Content