The Progression from Voluntary to Mandatory Derivative Instrument Disclosures – Look Who's Talking

The growth of derivative markets over the past decade suggests that many entities are using these instruments. The transparency of firms' exposures and their accounting treatment have become critical issues, particularly given the media attention to derivative‐related losses by some high‐profile corporations. This paper focuses on derivative instrument disclosures during a three‐phase disclosure regime — pure voluntary disclosure (1992–94), coercive voluntary disclosure (1995–97) and mandatory disclosure (1998). The time frame provides an insight into firms' and regulators' responses to information demands by stakeholders. Increases in disclosure of information, even if incomplete, are particularly noticeable in 1995, the beginning of the coercive regime, and in 1998 when the disclosures became mandatory.