Fitch shows lack of derivatives disclosure

LONDON -- Fitch Ratings' recent study of hedge accounting and disclosure among corporates has revealed a somewhat surprising lack of public disclosure of derivatives use. The study focused mainly on US corporates that have been reporting under FAS 133 -- the accounting rule that should have improved the transparency of derivatives use. And because of this lack of transparency, Fitch is concerned about potential reporting and restatement risk caused by difficulties associated with hedge accounting.

"The surprising thing to us was that even though these companies had been reporting under FAS 133 there really isn't enough public disclosure to serve as a basis for decent credit analysis," says Bridget Gandy, managing director at Fitch in London and co-author of the report. "To see that there really isn't that much useful reporting from corporates using FAS 133 is quite surprising."

Fitch compared what corporates reported under FAS 133 with the responses received from its survey of 57