WASHINGTON -- The Financial Accounting Standards Board is struggling to devise guidelines to recognize and measure the risks of derivative investments used in hedging.

Staff members working on the board's hedge accounting proposal say the guidelines may not come out until the middle of next year or even later. Just 12 days ago in a speech in Tokyo, Securities and Exchange Commission chairman Arthur Levitt said the standards board is expected to issue the proposal in the first quarter of 1995.

The FASB is an independent board that sets accounting rules for all companies that follow generally accepted accounting principles.

"We had hoped that we could have something out by the end of the second quarter," said Jane Adams, the hedge accounting project manager. "I don't have any good feelings about when we'll come up with something."

Adams said it is hard to come up with a model that measures current risk exposure as well as one that forecasts exposure in derivative investments used as a hedge.

"Some of the board members felt that it was difficult to demonstrate this," Adams said. She added that the panel is continuing with its efforts and plans to go before the accounting board in two weeks to address the issue again.

Meanwhile, the board has taken some big steps toward improving the disclosure of derivatives.

Earlier this month, the board came out with broad disclosure standards that will be required in financial statements issued for fiscal years ending after Dec. 15 of this year.

However, entities with less than $150 million in total assets won't have to follow the guidelines for another year.

The most recent accounting board guidelines ask companies to disclose the amounts, nature, and terms of derivatives.

For derivatives held for trading purposes, the standards require disclosure of the average fair-value balance of positions during the reporting period and the net gains or losses occurring from trading and where those amounts are reported in the income statement.

While the recently released standards give investors a better picture of the nature of positions a particular organization is taking, they don't show how they are accounted for, said assistant project manager Jeffrey Mahoney.

That aspect is being tackled by the hedge accounting project and is something officials at the Securities and Exchange Commission have asked for.

SEC officials have expressed concerns about whether the board's derivatives disclosure guidelines went far enough.

The agency is considering whether it should issue additional guidelines with respect to derivatives, an agency official said.

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