Some disclosure proposals for derivatives would burden dealers, PSA tells FASB.

WASHINGTON -- Some of the disclosure standards proposed for derivatives by the Financial Accounting Standards Board would be burdensome for dealers and not very useful to investors, the Public Securities Association said Friday.

The private sector standards-setting board proposed draft standards last April to improve the information that is disclosed about derivatives by both dealers and users of the products.

But the Public Securities Association, in written comments submitted to the board last week, said that while it generally supports enhancing derivatives disclosures, it opposes some of the standards proposed by the board.

The PSA was particularly critical of the board's proposal to require firms to report the daily minimum and maximum fair values, as well as gains and losses, for the derivatives they hold "for trading purposes."

Collecting and maintaining this daily information would be costly and burdensome for firms, the association said. At the same time, investors and creditors would probably not find the information useful, it said.

"We do not oppose disclosing average balances which, when coupled with comparable year-end balances, should provide adequate information about a firm's activities over the reporting period," the association said. This information could be constructed from calculations made less frequently than on a daily basis, it said.

The PSA said also that it strongly opposes the board's proposal that firms report gains and losses from the trading of individual derivatives products because trading revenues and records are not kept separately for each type of product.

The association said it is not opposed to, but questions, the disclosures proposed for derivatives that are not used for trading.

Why should firms that use derivatives to hedge risks be forced to make disclosures that are not required of firms that do not hedge or manage their risks, the association asked.

The PSA agreed with the board's narrow definition of derivatives, which the PSA said would include futures, forwards, swaps, and options contracts but not mortgage-backed securities or indexed debt instruments.

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