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LEGISLATIVE UPDATE: FAS 161 - Disclosures about Derivative Instruments and Hedging Activities 
LEGISLATIVE UPDATE: FAS 161 - Disclosures about Derivative Instruments and Hedging Activities
The purpose for this statement is to improve financial reporting about derivative instruments and hedging activities. It requires enhanced disclosures to enable investors to have a better understanding of their effect on an entity’s financial position, performance, and cash flow.
It was felt that FASB 133, Accounting for Derivative Instruments and Hedging Activities did not provide enough information about how derivative instruments or hedging activities impacted financial position and performance. The past several years have seen a significant increase in the use and complexity of derivative instruments and hedging activities, necessitating the new standard. Now investors will have better information on which to base decisions.
Required disclosures include the fair values of derivative instruments and subsequent gains and losses in a tabular format; derivative features that are credit-risk related; and cross-referencing within the footnotes so financial statement users can locate important information about the derivative instruments more easily.
FASB 161 becomes effective for financial statements that are issued for any fiscal years or interim periods beginning after November 15, 2008; however, early application is encouraged.