Bank One Corporation - Page 228

                                        -68-                                          
          system was that new financial instruments created potentially               
          large risks not reported on the balance sheet.  Forward                     
          contracts, for example, typically require no exchange at                    
          inception, so the transaction-based value would be zero at                  
          inception and would remain zero until maturity.  At maturity, the           
          cash settlement would determine income or loss, without any value           
          ever appearing on the balance sheet.                                        
               A second concern with the transaction-based system was that            
          firms could sell appreciated on-balance-sheet investments to                
          report gains and leave investments that had declined in value               
          reported on the balance sheet at their original cost.  A third              
          impetus for increasing the use of market value information in               
          financial reports was the greater acceptance of theoretical                 
          models and the wider availability of financial data to support              
          more reliable and informative reports.  For example, although               
          models of option pricing existed in the academic finance                    
          literature in the 1970s, their acceptance in accounting practice            
          began only in the mid-1980s.                                                
                    5.  SFASs                                                         
               From in or about March 1990 through June 1998, the FASB                
          worked on its financial instruments project.  As part of that               


          28(...continued)                                                            
          the appropriate accounting for such hedges.  SFAS No. 52 does not           
          discuss the appropriate accounting for nonhedging swaps such as             
          those at issue.                                                             




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