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Interest rate caps and floors will lose some of their appeal under the U.S. Financial Accounting Standards Board's new hedge accounting rules. In practice, most end users currently view option time value-the difference between an options price and its parity, or intrinsic value-as a cost allocated across the life of the cap or floor. Under FAS 133, caps and floors will have to be adjusted to market swings, meaning that they will be recognized in income statements, said Irg Kawaller, founder of Kawaller & Company in New York and` member of the FASB's derivatives implementation group. The key difference FAS 133 introduces is that firms will not be able to predict the amount of the time value expense in each period, said Jim Johnson, partner, capital markets division at Deloitte & Touche in New York.