The Commission release contains interpretive guidance. When is that guidance effective?
Answer The Commission’s release reminds companies of the requirements of Rule 12b-20 under the Exchange Act and Rule 408 under the Securities Act. Specifically, the release observes that companies provide information about specific terms, fair values, and cash requirements of assets, liabilities, and anticipated transactions. If derivatives are used to alter the characteristics of these items, disclosure of how derivatives, either directly or indirectly, affect terms, fair values, or cash flows of those items is necessary to keep the disclosures about the hedged item from being misleading. That interpretive guidance was contained in the proposing release issued in December 1995. It applied to all companies immediately upon its publication in the Federal Register.
