The unspoken reason for shying away from FAS 133, according to the study, is the risk of restatements linked to hedge accounting, particularly related to the documentation and monitoring of the hedge effectiveness. The restatements, both intentional and unintentional, relate to the so-called short-cut method, which requires little or no documentation or ongoing monitoring of accounting hedges. This method allows companies to presume "perfect hedge effectiveness" if several FAS 133 criteria are met. Failure to meet the criteria results in restatements, as was the case with several financial-services companies, including AIG, Bank of America, Fannie Mae, Freddie Mac, Ford Motor Credit, and GE Capital, reports the study.
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Reader CommentsDisplaying 3 of 4
Shaoyou Wang
Mar 6, 2011 9:59 AM ET
@Jiro Okochi
I totally agree with you. Hedge accounting is a must have in this "post-crisis" economy. Most companies realize the … more
Jiro Okochi
Sep 14, 2008 8:07 PM ET
timeoutfas133.com
While there have been hundreds of FAS 133 restatements, most of those appeared to have slowed down of late. The … more
Dave Parsons
Sep 8, 2008 6:08 PM ET
To Hedge or Not to Hedge
It's important to note that it may be easier to exclude the impact of "non-effective hedging" via the presentation of … more
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