At this time of year public quoted companies are posting their quarterly results and it has become apparent that a new accounting standard has come into play that some people may feel gives the appearance of distorting the figures.

All companies publicly quoted in America comply with GAAP -- General Accepted Accounting Principles -- in the way they present their accounts. A new required standard has been introduced which is showing up in the published results for the first quarter of 2001.

Financial Accounting Standard No 133, titled Accounting for Derivative Instruments and Hedging Activities, requires companies to include the full market value of their derivative and hedging activities.

They did not have to do this before and the figures were included in the accounts in annual incremental amounts each of which represented only a part of their commitment to these activities.

This quarter, the commitments show up as the total commitment and may have a positive influence on the income figures, but for most companies it shows a negative result and reads as an expense. This is a one-off occasion.

This has affected all listed companies that have to comply with US Securities and Exchange Commission (SEC) GAAP requirements. For example Microsoft in the US reported, "Adoption of this new accounting standard resulted in cumulative after-tax reductions in net income of $375 million in the first quarter of fiscal 2001.'' Local examples of this have shown up in ACE Ltd.'s first quarter results which recorded a $23.6 million one-time expense in relation to FAS 133. But swinging the other way was PartnerRe which recorded a non-recurring benefit of $27.8 million as the cumulative effect of adopting the standard.

If no recorded amount is shown in the results this will be because either the company pipped the post and got it into the previous quarter or the company is not involved in any derivative or hedging activities.

The SEC has the statutory authority to establish GAAP for filings made with it and is active in both its oversight responsibility as well as establishing guidance and interpretations. The volume and complexity of US GAAP is increasing as is evidenced by the fact that the statement on FAS 133 is 245 pages long.