In many countries, financial markets and related laws and regulations have strict supervision on the use of financial derivatives, which are designed to ensure transparency and accurate risk disclosure. However, complex financial derivatives can sometimes be used to ostensibly improve a company's financial statements or adjust its risk profile. This practice may operate in a legal gray area, but it may still violate the principle of true and fair financial reporting required. Here are some key factors to consider: 1. **Regulatory requirements**: Most countries require companies to fully disclose the nature and impact of the derivatives they use in their financial statements. Both the International Financial Reporting Standards (IFRS) and the Generally Accepted Accounting Principles (GAAP) in the United States have detailed requirements for the disclosure of derivatives. 2. **Audit supervision**: External auditors have the responsibility to review corporate financial statements to ensure that they fairly reflect the company's financial position, including the risks associated with derivatives. This means that misleading financial arrangements may be revealed during the audit process even if they are not illegal. 3. **Market and investor supervision**: Financial market participants and analysts usually analyze corporate financial statements in depth. If there are signs that significant financial risks are being concealed, they may receive additional attention and scrutiny from the market. 4. **Legal consequences**: If the intention of using complex derivatives is to deliberately mislead investors, regulators or other stakeholders, even if it is not formally illegal, it may still face legal action, fines or other penalties. Therefore, although it is theoretically possible to hide financial risks to a certain extent through complex financial derivatives, in practice, such behavior is extremely risky and may also lead to serious legal consequences and reputational damage. It is wiser for companies to maintain transparency, comply with regulatory requirements, and communicate their financial status and risks in a fair and transparent manner.