Fortune 1000 companies are curtailing their use of complicated derivatives strategies and focusing on more "simple and stable” investments in order to comply with FAS 133, according to a new study by Solution133.com. The study found a majority of companies plan to stick with "plain vanilla” strategies until they can determine what, if any, effect derivatives use will have on earnings volatility. Of companies with more than $1 billion in sales and revenue, 85% reported using interest rate swaps to hedge risk, and more than 95% said a senior executive was handling FAS 133 compliance.
FAS 133, effective Jan. 1, requires companies to report derivatives on their balance sheets at fair market value. It also requires those strategies be tested for effectiveness and that those results be reported.
Solution133.com is a joint venture of PricewaterhouseCoopers LLC and Gifford Fong Associates. A copy of the report can be found on the venture’s website, www.Solution133.com.
