Greenspan Faults Derivatives Proposal

The Financial Accounting Standards Board’s latest derivatives accounting proposals have now come under fire from Federal Reserve Board Chairman Alan Greenspan, who has sided with the nation’s top corporate executives. Not only did Greenspan tell the accounting board to slow down and allow more time for industry input on the controversial standards, he recommended the board consider a different proposal altogether. “While we support FASB’s objective of promoting greater transparency of derivatives in financial statements, the proposal continues to take a piecemeal approach to fair value accounting, which raises a number of concerns,” Greenspan wrote in a July 31 letter to the independent board, which sets the accounting guidelines companies must use. Greenspan recommended that the accounting board instead require companies to describe their derivatives holdings in more detail, rather than change how they report related gains and losses each quarter in their financial statements. His comments came after a group of top executives from major U.S. companies last week complained that the pending rules might have a bad effect on the markets, which has become a heightened concern among market players as the Dow Jones industrial average has reached all-time highs. The FASB has been working on the rules for several years but recently picked up its pace under pressure from Securities and Exchange Commission Chairman Arthur Levitt, aiming for completion by year-end.