FMA Member Opinions regarding FASB Exposure Draft on Disclosures about Financial Instruments

Abstract

Recently we completed a project that gathered information about FMA members' opinions concerning an exposure draft dated November 30, 1987, Proposed Statement of Financial Accounting Standards Disclosures about Financial Instruments, issued by the Financial Accounting Standards Board (FASB). This proposed statement is the first document issued for comment as part of the Board's project on financial instruments and offbalance-sheet financing. The Board undertook this project partly in response to concerns expressed by many that newly created financial instruments (such as interest rate swaps, options, forward interest rate contracts, financial guarantees, and repurchase agreements), which are increasingly important for both financial institutions and nonfinancial entities, were not being reported (or not being adequately reported) in financial statements. A random sample of 400 members was selected for this study. Critical issues were identified and incorporated into the final questionnaire. A response rate of approximately 23%, or 93 questionnaires, was obtained. A null hypothesis was developed for each question with a scaled mean score (SMS) computed to test each hypothesis. The FASB in the exposure draft has made tentative decisions concerning information about credit risk, future cash receipts and payments, interest rates, and market values. FASB members did not agree on all issues. The exposure draft requires disclosures about all financial instruments, but does not affect recognition, measurement, or classification in the financial statements.