Fair value accounting in many circumstances relies on marking asset valuations to market prices. In the current financial crisis, active markets have largely frozen for many securitized assets. However, fair value accounting permits valuations based on underlying cash flows and other factors. Companies—and even Congress—have asked FASB for additional guidance on how to determine fair values in the current environment. The following is a collection of JofA news, opinion and analysis and feature articles dealing with fair value accounting and a listing of relevant authoritative guidance.
NEWS
Technical Q&A Addresses Fair Value Measurement Disclosures for Master Trusts
May 20, 2009
The AICPA’s accounting standards staff issued Technical Practice Aid (TPA) 6931.11, Fair Value Measurement Disclosures for Master Trusts. The aid provides guidance on fair value measurement disclosure requirements for an employee benefit plan when the plan holds investments in a master trust.
SEC Amends Accounting Guidance on Other-Than-Temporary Impairment
April 15, 2009
The SEC's Office of the Chief Accountant and Division of Corporation Finance announced the release of Staff Accounting Bulletin (SAB) no. 111 that amends Topic 5.M. in the SEC's Staff Accounting Bulletin Series titled Other Than Temporary Impairment of Certain Investments in Debt and Equity Securities.
FASB Releases Final Versions of New Mark-to-Market Guidance
April 10, 2009
FASB on Thursday released final versions of authoritative guidance on the application and disclosure of fair value measurements and impairments of securities.
FASB Approves New Mark-to-Market Guidance
April 2, 2009
Exactly three weeks after FASB Chairman Robert Herz’s March 12 testimony before a rancorous House Financial Services subcommittee, the independent standard-setting board voted Thursday. April 2, to release three new pieces of guidance to address concerns over the application of fair value accounting standards in current market conditions.
FASB to Take Up Fair Value Proposals
April 2, 2009
FASB board members meet today to consider proposed fair value guidance, including two proposed FASB Staff Positions (FSPs): FAS 157-e, Determining Whether a Market Is Not Active and a Transaction Is Not Distressed, and FAS 115-a, FAS 124-a, and EITF 99-20-b, Recognition and Presentation of Other-Than-Temporary Impairments..
Treasury Plan Calls for More Disclosure, Cooperation With SEC, Accounting Standard Setters
Feb. 11, 2009
Treasury Secretary Timothy Geithner’s plan to rescue the nation’s financial system doesn’t appear to signal a major departure from the current accounting regime, observers said.
IASB, FASB Focus on Impairment, Other Issues Raised by G-20
Jan. 21, 2009
The International Accounting Standards Board (IASB) announced a series of actions it has taken to address recommendations made by the G-20 leaders last November in Washington.
SEC Releases Fair Value Findings
Dec. 31, 2008
The SEC, in a report mandated by Congress, supports the continued use of fair value accounting standards while also making eight recommendations to improve application of the standards. The suggested changes include reconsidering accounting for impairments of financial instruments and developing more guidance for determining the fair value of investments in inactive markets.
FASB Issues Proposals to Improve Financial Reporting for Financial Instruments
Dec. 30, 2009
FASB issued two proposals intended to address concerns arising from the financial crisis relating to accounting for financial instruments.
More Guidance Expected on Fair Value
Dec. 9, 2008
FASB Chairman Bob Herz says he’s interested in exploring additional disclosure rules that would make valuation techniques more transparent to users of financial statements.
OPINION AND ANALYSIS
Fair Value Roundtable
June 2008
A panel of financial reporting experts including FASB Chairman Robert Herz; Michael Hall, a partner with KPMG LLP; Gordon Goodman, trading control officer with Occidental Petroleum Corp.; and Michael Young and Antonio Yanez Jr., both of Willkie Farr & Gallagher LLP, recently met in New York to discuss the role of accounting in the subprime collapse and to predict how financial reporting could change in light of current events.
The Role of Fair Value Accounting in the Subprime Mortgage Meltdown
May 2008
As the credit markets froze and stocks gyrated, investors and pundits naturally looked for someone, or some thing , to blame. Fair value accounting quickly emerged as an oft-cited problem. But is fair value really a cause of the crisis, or is it just a scapegoat? And might it have prevented an even worse calamity?
FEATURE ARTICLES
Weathering the "Other-Than-Temporary" Impairment Storm
March 2009
Given the highly unusual market conditions in recent months and recent guidance issued by FASB, companies are struggling to understand and properly apply accounting guidance to their investment securities. Two experts provide tips for improving such evaluations under new FASB Staff Position, EITF 99-20-1, Amendments to the Impairment Guidance of EITF Issue No. 99-20, published Jan. 12.
Securitized Profits
May 2008
In the wake of the subprime meltdown, investors and finance professionals alike have been asking themselves how these companies could have recorded such huge profits on the sales of bad loans. A forensic accounting specialist explains the accounting behind these controversial transactions and takes a look at how FASB may respond with new guidance.
The Finer Points of Fair Value
December 2007
The first quarter of 2008 is expected to usher in the first significant wave of financial statements from companies that have chosen to adopt FASB’s new fair value option for financial assets and liabilities, FASB Statement no. 159. Tapping the option requires new disclosures.
Refining Fair Value Measurement
November 2007
FASB Statement no. 157 specifies new factors to consider when measuring fair values that are already required in GAAP. The authors explain some of the changes caused by the new standard and the uniformity and consistency it brings to fair value measurements.