All public companies will soon face new requirements to provide investors a better picture of their pending cash obligations and available funds to meet them, with banks facing even more requirements to explain their risks.
The Financial Accounting Standards Board has proposed a new accounting standard that will require companies to present additional tables in the footnotes to explain liquidity risks and mandate that banks disclose their risks from potential fluctuations in interest rates. FASB initially sought to expose such risks with a May 2010 proposal to require all financial assets and financial liabilities to be measured at fair value, but it abandoned the idea after determining that no measurement approach—fair value or historical cost—would adequately convey risks related to liquidity problems or changes in interest rates.
