Effect of SEC financial reporting release no. 48 on derivative and market risk disclosures

This study compares the disclosures about derivatives and market risk made by 25 SEC registrants in the years before and after the adoption of Financial Reporting Release No. 48. FFR 48 requires firms to disclose how they account for derivatives and provide quantitative and qualitative disclosures about exposure to market risk. Market risk disclosures, encouraged but not required under FAS 119, improved greatly under FFR 48 but varied widely in detail and clarity. While registrants greatly increased their disclosures about market risk, the disclosures leave room for improvement in future filings. The findings have significance for disclosure choice in general and the adoption of FAS 133 in particular.