When the SEC ruled in December 2004 that Fannie Mae had misapplied derivatives accounting rules, known as FAS 133, it resulted in fresh criticism of an accounting standard that has been a lightning rod for controversy since its introduction in 2001. Whether or not Fannie Mae had deliberately misinterpreted the rules, critics claimed that there had to be something wrong with a standard so complex that auditors couldn't be relied upon to spot the problem.

Since then, FAS 133 hasn't changed, but the way auditors approach it has, says Jiro Okochi, the New York-based CEO with treasury and risk software firm Reval.com Inc.: "Auditors are sticking strictly to the letter of the law. We've heard from lots of [executives who] are being told that they can no longer do things the way they used to."

In particular, companies are finding it harder to qualify for the shortcut method–one of the areas of FAS 133 that tripped up Fannie Mae. FAS 133 offers the shortcut method as a kind of safe harbor for companies that would like their hedges to qualify under the rule's hedge accounting standard, but at the same time want to duck the rigors of the testing required to demonstrate that the values of derivative and hedged items offset each other adequately. According to the language of the standard, the shortcut can be applied when a derivative and an underlying exposure offset each other perfectly–in other words, when the net value of the hedge is zero.