The Financial Accounting Standards Board may delay-for a second time-enforcement of its controversial derivatives rule.

Issued in June 1998, FAS 133 requires companies to report derivatives at fair market value on quarterly income reports. It has drawn strong criticism from banks and trade groups, largely because of its complexity.

The rule was originally supposed to take effect in fiscal years beginning after Jan. 1, 1999, but FASB pushed back the deadline to June 15 in order to let banks focus on year-2000 preparations.

Timothy S. Lucas, FASB's re-search director, said the agency's board is considering whether a second postponement is needed because Fannie Mae and others have complained that June 15 comes too close to the year-2000 rollover date.

At a minimum, he said in an interview, the effective date would be pushed back a year. An 18-month delay, until Jan. 1, 2001, "wouldn't be unthinkable," he said.

If FASB is going to act, it must do so soon. Under its due process procedures, the board would have to draft the proposed deadline extension, open a 30-day comment period, incorporate the comments, then vote on a final version.

"Backing up from June 30, we need to make the decision yesterday," Mr. Lucas said. "The time is very short."

Fannie Mae's chief financial officer, J. Timothy Howard, argued for a delay in an April 12 letter to FASB.

"The combination of (year-2000 preparations) with the adoption of FAS 133 has placed a substantial burden on technology resources and raises concerns as to whether all objectives can be met," he wrote. "Fannie Mae and its investors would be better served if FASB delayed the effective date of the standard a year."

Federal regulators have given banks and thrifts until June 30 to finish fixing and testing computer systems. Many institutions want to "freeze" their year-2000-compliant systems-that is, prohibit further software or coding changes on them-from then until after Jan. 1.

But preparing for the new derivatives accounting rule could require dramatic system renovations and thus re-testing of those systems, a procedure that could set back banks' year-2000 efforts.

Joseph Lanza, controller at the German institution HypoVereinsbank, said that without a delay his bank might end up temporarily adopting "manual" approaches to satisfying the new accounting rule so as not to upset its year-2000-tested systems.

"I don't even know if there's any software available on the market that can handle this at the time," he said Friday at a conference sponsored by the American Institute of Certified Public Accountants.

At least one bank regulator at Friday's AICPA conference expressed sympathy for the argument.

"Anything that gets in the way of Y2K preparedness" should be postponed, said Zane D. Blackburn, chief accountant at the Office of the Comptroller of the Currency.

But he said it is up to banks to plead their case with FASB. According to FASB's Mr. Lucas, only a couple of financial services companies have written so far.

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