The Financial Accounting Standards Board will huddle again over a key rule on derivatives accounting after a draft won only lukewarm support.

Derivatives users and dealers had been awaiting the board's guidance on how to account for swings in value of derivatives contracts when they are being used to hedge interest and other risks.

But when a vote was taken Tuesday on whether to support the hedge accounting proposal, only two on the seven-member board voiced strong support for the draft. Two opposed it; two gave it a tepid response, and the chairman, Dennis Beresford, abstained.

The delay could hurt the board's chances of issuing a formal draft by the end of June, when two board members' terms expire. The board hopes to meet again this month to hash out the issue.

Derivatives are financial contracts whose values are determined by changes in currency exchange or interest rates or in other assets and indexes.

James Leisenring, the board's vice chairman, said he specifically objected to the proposal's requirement that changes in value of both the transaction being hedged and of the derivatives transaction be marked to market.

Under the current proposal, issued in January, companies using derivatives to hedge would get hedge accounting treatment only in certain circumstances.

Among other things, a company would have to demonstrate that a hedged transaction was consistent with its risk management policies and its established business and that the cash flows from the derivatives transaction offset the cash flows from the underlying transaction.

Even in those circumstances, the company would have to mark to market the changes in value of the derivatives in its equity statement.

Any transactions not meeting the hedge criterion would have to show changes in value of the derivatives transactions in the company's income statement.

Mr. Leisenring said companies should be able to restrict showing changes in the value of these derivatives to the amount of change in the underlying instruments they are designed to hedge.

For instance, a company that has entered into a swap to reduce the foreign exchange risk from a fixed-rate loan denominated in a foreign currency should be able to defer recognizing changes in value of the derivative caused by changes in exchange rates.

"I want us to explore how difficult it would be" to do this, he said.

The confusion caused by the different proposals shows the accounting profession is headed in the wrong direction, said George Benston, an accounting professor at Emory University.

"My position is that, if you try to make rules to cover every reasonable set of circumstances, it will get out of hand," he said.

In place of the board's proposals, he advocates adopting the "critical event and matching concept." Under this approach, any gain or loss on the derivative would be deferred until a trigger event occurs, such as completion of an underlying transaction.

"That what is correct in accounting should be determined by a majority vote of seven people is crazy," he said.

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