Fair value standard fulfills purpose, review finds


A Financial Accounting Foundation review team’s positive feedback on FASB’s fair value measurements standard was tempered by one finding: Some investors question its usefulness for financial statements of employee benefit plans, not-for-profits, and private companies.

According to the review team, FASB Statement No. 157, Fair Value Measurements, generally provides investors with decision-useful information and resolved the issues underlying its stated need. Before the standard was issued in September 2006, different definitions of fair value and limited guidance for applying those definitions were scattered throughout U.S. GAAP.

The standard was designed to increase consistency and comparability in—and expand disclosures about—fair value measurements. The review team found that the most useful disclosure for investors is the description of the inputs and valuation techniques used to measure fair value.

In addition, Statement No. 157’s requirements are understandable, can be applied as intended, and allow information to be reported reliably, the review team concluded. But some investors have found that the information resulting from applying Statement No. 157 is not relevant to or meaningful for employee benefit plans, not-for-profits, and private companies.

Some respondents to the review team also said it is costly to comply with Statement No. 157. But the review team concluded that the ongoing costs are not exclusively due to Statement No. 157’s requirements, but are the result of regulatory issues that that arose after the statement was issued.

“The post-implementation review report on Statement 157 identified many positive aspects of the fair value standard, most importantly that it met its objectives and did not result in any unanticipated consequences,” FASB Chairman Russell Golden said in a news release.

Golden said FASB plans to provide an initial response to the review team’s findings in the coming weeks.

Ken Tysiac ( ktysiac@aicpa.org ) is a JofA senior editor.


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