AICPA Committee Weighs In on Fair Value for Financial Instruments


The AICPA’s Accounting Standards Executive Committee has weighed in on FASB’s discussion of when fair value should be used to measure and record financial instruments on the balance sheet.

 

In a comment letter, AcSEC Chairman Jay Hanson said the committee favors an approach that would measure many but not all financial instruments on the balance sheet at fair value.

 

AcSEC said in the letter that “a one-size-fits-all balance sheet measurement approach for financial instruments will not result in useful information across all user categories (for example, equity analysts, private company lenders, credit rating agencies, sureties, venture capital investors, and donors to [not-for-profit entities.]”

 

AcSEC “believes that the nature of a financial instrument, along with its established use in an entity’s business model, should impact the determination of whether that instrument should be measured and recorded on the balance sheet at fair value,” the letter states.  “In addition, AcSEC believes that the needs of the primary financial statement users, which may vary by the type of entity (meaning public company, private company, or not-for-profit organization), should be an important factor in determining the most meaningful measurement of financial instruments.” 

 

The committee cited a 30-year fixed rate mortgage loan held to maturity as an example of a financial instrument that should not be measured and recorded on the balance sheet at fair value. 

 

In the letter, AcSEC says it appreciates that FASB tentatively has decided to scope out certain financial instruments from the fair value measurement requirement and will soon focus on different user needs. The committee suggests FASB should perform a user needs assessment as it moves forward. 

 

AcSEC is a 15-member senior executive committee of the AICPA with authority to speak on accounting standards and financial reporting. The committee includes representatives from accounting firms, companies, academic and user communities.

VIDEO

Excel walk-through: Sparklines

Want to liven up your spreadsheets with some color and graphical elements? Kelly L. Williams, CPA, Ph.D., shows how to use Excel sparklines, which illustrate data trends and patterns via small charts that fit in a single Excel cell.

PODCAST

What’s next for potential CPA licensure changes

A new model proposed by NASBA and the AICPA is designed with an eye on the future for newly licensed CPAs. The AICPA's Carl Mayes, CPA, provides background on the project and a look ahead to 2020.