It's September 2000, and US companies are getting panicked. As are equity analysts and debt underwriters. It's the first reporting quarter for those companies whose financial year starts in June, and the fear is that many could see their earnings differ wildly from estimates. Investors will be shocked, share prices could rise or fall sharply. Corporate treasurers fear for their jobs.
It must surely be because they've lost control of their businesses, been engaging in sharp practice, blown money on bad acquisitions? Nothing quite so dramatic. The cause of this potential pandemonium is an accounting rule change by the Federal Accounting Standards Board, called FAS133, dealing with derivatives and hedge accounting.
Yes, an accounting rule change. It is a rule that GECC's treasurer, Jeffrey Werner, referred to at a recent Euromoney conference as "one of the biggest obstacles US issuers in foreign markets have faced in 10 years".
Its purpose is to get companies to mark derivatives transactions to market, and account for them on their balance sheets for the first time. So as of next year all derivatives positions will have to be revealed under the section "other comprehensive income".