Financial Reporting of Derivatives: An Analysis of the Issues, Evaluation of Proposals, and a Suggested Solution

J. OF FINANCIAL ENGINEERING, Vol. 4 No. 3, September 1995

Posted: 13 Jul 1998

See all articles by George J. Benston

George J. Benston

Emory University - Department of Accounting

Shehzad L. Mian

Emory University - Department of Finance

Abstract

The current financial accounting rules for derivatives are internally inconsistent, not uniform across various types of derivatives, and incomplete. A survey of derivatives users and our analysis of financial statements indicates that these rules have significantly constrained firms from using derivatives optimally. This research leads us to conclude that the rule changes considered by Financial Accounting Standard Board (FASB) would exacerbate this situation. We propose an alternative that is consistent with the long held "matching" concept of accounting, wherein losses and gains on derivatives are reported in the same periods as gains and losses on the associated assets and liabilities.

JEL Classification: M49

Suggested Citation

Benston, George J. and Mian, Shehzad L., Financial Reporting of Derivatives: An Analysis of the Issues, Evaluation of Proposals, and a Suggested Solution. J. OF FINANCIAL ENGINEERING, Vol. 4 No. 3, September 1995, Available at SSRN: https://ssrn.com/abstract=7122

George J. Benston (Contact Author)

Emory University - Department of Accounting ( email )

Goizueta Business School
1300 Clifton Road
Atlanta, GA 30322
United States
404-727-7831 (Phone)
404-727-5238 (Fax)

Shehzad L. Mian

Emory University - Department of Finance ( email )

Atlanta, GA 30322-2710
United States
404-727-2755 (Phone)
404-727-6313 (Fax)

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