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Disclosures
Notes:
MTM = Mark-to-market
FAS 133 = Financial Accounting Standards Board
This Statement establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, (collectively
referred to as derivatives) and for hedging activities.
It requires that an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. If certain
conditions are met, a derivative may be specifically designated as (a) a hedge of the
exposure to changes in the fair value of a recognized asset or liability or an unrecognized
firm commitment, (b) a hedge of the exposure to variable cash flows of a forecasted
transaction, or (c) a hedge of the foreign currency exposure of a net investment in a
foreign operation, an unrecognized firm commitment, an available-for-sale security, or a
foreign-currency-denominated forecasted transaction.
A: Of the 15 companies surveyed, all of the companies except one, Enbridge, included
the Fair Value Disclosure in their 10K Annual Reports, most with substantial detail,
definitions, and strategy.
The Sarbanes-Oxley Act of 2002 requires the CEOs and CFOs of public companies to
make certain certifications relating to the financial statements included in SEC filings.
In view of the required disclosures about the impact of material trends and uncertainties
on an issuer’s financial condition and results, additional information about trading
activities may be necessary. The following additional disclosures about trading contracts
should be considered:
1. Disclosure of both the realized and the unrealized changes in fair value.
2. Identification of the impact changes have in valuation techniques on the fair value.
3. Disclosure of the fair value of both contracts where those values are determined
directly from quoted market prices and contracts where the fair values are estimated.
4. Disclosure of the maturities of the contracts outstanding at the latest balance sheet date.
5. Disclosure of the fair value of claims against counterparties that are in a net asset
position at the most recent balance sheet date, based on the credit quality of the contract
counterparty (e.g., investment grade, non-investment grade, and no external ratings).
March 9, 2009