Derivatives dealers blasted a decision by the Financial Accounting Standards Board to impose tougher accounting without allowing time for further review.

The board said last week it expected to publish the rule, requiring companies to recognize the fair value of their derivatives holdings on financial statements, at yearend. Under that timetable, the rule would take effect in January 1999 for most companies.

The rule is the result of about a five-year effort to address corporate America's growing use of the volatile financial contracts. The board argued the value of derivatives should be reflected on balance sheets to give more "transparency" to the derivatives contracts-which have caused unexpected losses for companies that didn't fully understand their risks.

Traders have argued that the on-balance-sheet treatment would result in needless earnings volatility.

"Since FASB has made significant changes to what was proposed in its original draft, we believe that the final standard should be reviewed by a broad group, not just the Financial Instruments Task Force of FASB," said Gay H. Evans, chairman of the International Swaps & Derivatives Association.

Patrick Montgomery, vice chairman of the Treasury Management Association, a staunch opponent of FASB's proposals, said it could have been worse.

"We're encouraged the board decided to delay the effective date to companies whose fiscal years begin after December 15, 1998," he said. "That's a year later than their original draft, and the time will be necessary to step up systems and build up legal and accounting expertise to deal with this new rule."

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