In May 2011, the FASB issued Accounting Standards Update No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (the ASU). The ASU results from a joint project with the IASB, who issued IFRS 13, Fair Value Measurement, in May 2011. Many of the changes to existing fair value measurement guidance represent clarifications and are intended to align U.S. GAAP and IFRS. However, certain of the amendments to U.S. GAAPare substantive and require analysis of current practice.
The ASU is effective for public companies in interim and annual periods beginning after December 15, 2011. Application of the ASU is prospective.
This Dataline provides implementation guidance on certain aspects of the ASU, specifically regarding the fair value measurement of financial instruments, including (1) the application of premiums and discounts, (2) measuring the fair value of financial instruments with offsetting market and credit risks, and (3) the valuation of a portfolio of mortgage loans held for sale.
* This Dataline was revised on March 1, 2012 to correct the effective date of the ASU in the fifth bullet of the “Overview” section. The Dataline was also revised on December 22, 2011 to reflect the announcement of an upcoming FASB Technical Correction that will clarify the application of the "portfolio exception." The updates were made to the section titled “Measuring the fair value of financial instruments and non-financial derivative instruments with offsetting risks,” beginning in paragraph 16. Also, paragraph 13 was revised to include a reference to impairment assessments.