The imminent adoption of controversial new International Financial Reporting Standards may tempt European companies to reduce their derivatives-based hedging activities even if the move damages them, according to rating agency Fitch.

Analysts Joseph St Denis, Bridget Gandy and William Mann were concerned about how corporate management might act to manage the volatility associated with switching to IFRS and pointed out potential dangers of the new standards, due to come into effect on January 1, 2005.