Analysis of Derivatives' Unrealized Gains/Losses from Pre-Sfas 133 Disclosures: Banking Industry (Manuscripts‪)‬

ABSTRACT Accounting for derivative instruments has had tremendous attention in the financial press due to far-reaching and complex problems. The impact of SFAS 133 will not be fully reported in annual reports until well into the year 2002. It is imperative that the potential impacts be anticipated. This article presents the results of an empirical study of the measurement and reporting practices of United States (US)-based banks for their financial derivatives instruments and hedging activities during the year 1998 before the Statement of Financial Accounting Standards (SFAS) Number 133 Accounting for Financial Derivatives Instruments and Hedging Activities became mandatory. The authors analyzed the 1998 annual reports of the largest twenty-five US-based banks. The pre-SFAS 133 measurement and reporting practices were adjusted to anticipate the impact of the SFAS 133 requirements. The impact was imputed and revealed that SFAS 133 has the potential of significantly changing financial results.