December 23, 2009
FASB to issue final guidance on additional fair value disclosures
On November 11, 2009, the Financial Accounting Standards Board ("FASB" or "the Board") concluded deliberations on its project to amend disclosures for fair value measurements and directed the FASB staff to draft a final Accounting Standards Update ("ASU") for vote by written ballot.
The proposed ASU, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements was issued by the FASB on August 28, 2009 with comments due on October 12, 2009. At the November 11th meeting, the Board discussed the standard's effective date, the proposed new disclosure requirements, and the proposed clarifications of existing disclosure requirements.
The Board's key decisions included:
Removal of the previously proposed sensitivity analysis for Level 3 measurements from the scope of the ASU
Required for financial statements beginning after December 31, 2009
Retention of the requirement to disclose the amounts of significant transfers in and out of Level 1 and Level 2 measurements and reasons for the transfers
Clarification of the level of disaggregation of fair value measurements for each class of assets and liabilities
Clarification of the disclosures about inputs and valuation techniques used to determine fair value for Level 2 and Level 3 fair value measurements
Required for financial statements beginning after December 31, 2010
Retention of a provision requiring reporting entities to present the activity within the Level 3 roll forward on a gross (rather than net) basis, including gross presentation of purchases, sales, issuances and settlements. Attachment 1 to this Advisory includes the proposed additional disclosures updated for the recent Board decisions.
This FASB project was added as one of several projects to address recommendations contained in the Securities and Exchange Commission’s recent study on mark-to-market accounting, and input provided by the FASB’s Valuation Resource Group, and other constituents. The proposed amendment will apply to all entities that measure or disclose fair value on a recurring or nonrecurring basis.