But it's a daunting task to essentially review all the hedges you have put on over the last five years and correct what you thought was okay. It would have been simpler if the rules had been changed so companies could more easily adjust what had been done before, rather than going back to square one. For instance, simply eliminating the shortcut entirely would have made the treasurer's job easier and less politically sensitive.

T&R: How has strict enforcement of hedge accounting rules changed the use of derivatives?

Okochi: For the most part, we are not seeing a decline in hedging activities or a major change in hedging strategies. Most of the scrutiny is around FAS 133′s shortcut and critical terms match. These were intended to benefit basic hedging strategies, like swapping debt to fixed or floating rates. Companies realize they can't suddenly stop hedging core activities because it injects too much uncertainty. Instead, they are being forced to take the time to understand the various long-haul methods, like regression. At the end of the day, the death of the shortcut doesn't mean you can't hedge–it's just going to be much more time consuming.

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