On December 19, 2012, the FASB (the “board”) met to clarify the applicability of an exemption from a specific fair value disclosure for nonpublic entities.
The board decided to clarify that all nonpublic entities are exempt from the requirement to disclose the categorization by level of the fair value hierarchy for items disclosed but not measured on the balance sheet at fair value.
Certain nonpublic entities are excluded from the requirement to disclose the fair value of their financial instruments not measured at fair value on the balance sheet. Questions have arisen during the adoption of ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs, regarding which nonpublic entities are excluded from the new requirement to disclose the categorization by level of the fair value hierarchy for items not measured at fair value in the balance sheet but for which fair value is disclosed. Some read the exemption to apply to only those nonpublic entities that are able to apply the general exemption to not disclose the fair value of their financial instruments.
The board voted to clarify that all nonpublic entities are exempt from the requirement to disclose the level in the fair value hierarchy for items disclosed but not measured on the balance sheet at fair value. The board noted that this was its intent when it deliberated ASU 2011-04.
Although the issuance of ASU 2011-04 was the result of a joint project on fair value conducted with the IASB, the disclosure exemptions provided to nonpublic entities in ASU 2011-04 and confirmed at this board meeting are only for reporting entities applying U.S. GAAP. A similar scope exemption is not included in the IASB’s fair value standard.
Nonpublic entities are affected by the clarification.
ASU 2011-04 is effective for nonpublic entities for annual periods beginning after December 15, 2011. The clarification described above is not expected to have a different effective date.
A proposed ASU with the clarified language is expected in January 2013. The board decided to provide a 15-day comment period.
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