The FASB's preliminary views is an attempt to correct the years of altering US accounting standards as these tried to keep up with more sophisticated and complex hybrid capital instruments. The proposal, which is principle rather than rules based, classifies as equity the most residual claim on a company's net assets (typically common stock). Thus, all other financial instruments would be classified as either liabilities (even preferred stock) or assets. Therefore, the balance sheet will appear more leveraged and the income statement potentially more volatile than current standards would provide.

Fitch Ratings is supportive of the FASB's proposal but not because it results in an intuitive balance sheet or income statement from a creditor's perspective. Rather, the proposed principles would be difficult for companies to structure around, the resultant accounting would be easier to prepare and understand and Fitch analysts would be able to continue to adjust leverage and equity metrics to make their own determination of equity credit.

'While certain issues need resolution, Fitch will continue to press for robust, transparent disclosures to capture the information that is critical from a credit analyst's perspective,' said Dina Maher, Senior Director, Fitch Ratings.

Fitch's full report is titled 'Redefining Accounting for Equity: A Credit Analyst's Perspective' and can be accessed on the Fitch Ratings web site www.fitchratings.com. The report provides background on the latest FASB document, as well as an analysis of key issues that need resolution, and the implications for credit ratings analysis.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.