Fasb Grows New Fangs

A new rule forces companies to shed light on their derivatives

Skittish investors, who now hammer stocks if quarterly earnings are off as little as a penny a share, may soon be in for a shock. Earnings for much of Corporate America will soon become less predictable--maybe a lot less so--because of an accounting rule about derivatives that takes effect for some outfits as early as July 1. "We're in a different world," says Ira G. Kawaller, a consultant and a member of the derivatives implementation group of the Financial Accounting Standards Board (FASB). "It's a virtually foregone conclusion that there will be more earnings surprises."

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