Interest Rate Swaps: Are Current Disclosures Adequate?
Logman, Jason E.
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Interest rate swaps are becoming increasingly popular in financial markets today, both for speculative and hedging purposes. Because of this increase in use, it was necessary for the Financial Accounting Standards Board and the Securities and Exchange Commission to begin regulating the disclosure of these financial derivatives. Although several pronouncements from both of the previously mentioned governing bodies have been released in the past few years, the minimum requirements do not fully present a company's financial position in regard to their use of interest rate swaps. Since the majority of publicly held companies are meeting only the minimum requirements, many third party users are not given full disclosure. The purpose of this paper is to describe the current accounting standards set forth by the FASB and the SEC, to provide sample disclosures from several annual reports, and finally to recommend improvements that will enhance third party user's knowledge of a company's interest rate swap position.