Fair value measurement

Fair value accounting continues to be a topic of significant interest and debate. Fair value guidance is a principles-based global framework that, with few exceptions, impacts all fair value measurements in a reporting entity’s financial statements.

Video perspectives

The idea of the fair value hierarchy is twofold: 1) valuation, to maximize use of the most observable inputs, and for 2) disclosure, to increase consistency and comparability in reporting fair values. Hear Pwc’s Maria Constantinou discuss the basics of the fair value hierarchy, some thoughts on where you apply judgement, and examples in each level.

loading-player

Playback of this video is not currently available

Fair value hierarchy

 

Featured

Featured

 

Key developments in accounting for fair value

  • The FASB issued ASU No. 2015-07, Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent) in May 2015 that eliminates the requirement to include investments in the fair value hierarchy table whose fair values are measured at net asset value (NAV) using the practical expedient.
  • For some investments, NAV is fair value, not a practical expedient. In those cases, the investments must still be included in the fair value hierarchy table.
  • The guidance is effective in 2017 for calendar year-end nonpublic entities. Public business entities were required to adopt the guidance in 2016.
  • The new guidance must be applied retrospectively to all periods presented. Additionally, disclosure of the nature of and reason for the change in accounting is required.

Why it's important

  • This guidance removes the diversity in practice that currently exists by requiring the observability of the inputs to be the only criterion permitted for categorizing investments in the fair value hierarchy.
{{contentList.itemsCount}} {{contentList.resultsLabel}}
{{contentList.loadingText}}

Contact us

Beth Paul
US Strategic Thought Leader, National Professional Services Group
Email

David Schmid
IFRS & US Standard Setting Leader, National Professional Services Group
Email

Follow us