Fitch’s corporate derivatives usestudy finds lack of transparency

Fitch Ratings’ recent study of hedgeaccounting and disclosure amongcorporates has revealed a somewhatsurprising lack of public disclosure of derivativesuse. The study focused mainlyon US corporates that have been reportingunder FAS 133 – the accounting rulethat should have improved the transparencyof derivatives use. And becauseof this lack of transparency, Fitch is concernedabout potential reporting and restatementrisk caused by difficultiesassociated with hedge accounting.

“The surprising thing to us was thateven though these companies had beenreporting under FAS 133 there really isn’tenough public disclosure to serve as abasis for decent credit analysis,” saysBridget Gandy, managing director at Fitchin London and co-author of the report.“To see that there really isn’t that muchuseful reporting from corporates usingFAS 133 is quite surprising.”

Fitch compared what