FASB Issues Another 'Fair Value' Standard To Close the Gap on IFRS Covergence

On May 12, 2011, the Financial Accounting Standards Board (FASB), together with the International Accounting Standards Board (IASB), jointly issued Accounting Standards Update (ASU) 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS. This new guidance is the result of a highly contested proposal issued by the FASB and IASB back in August 2009. The adoption of ASU 2011-04 gives fair value the same meaning between U.S. generally accepted accounting principles (U.S. GAAP) and International Financial Reporting Standards (IFRS), and improves consistency of disclosures relating to fair value.

One of the most controversial pieces to the original FASB proposal was the recommendation to add disclosures about the sensitivity of fair value measurements categorized within Level 3 of the fair value hierarchy, which require the most judgment in determining fair value. Significant portions of this proposed disclosure were ultimately included in ASU 2011-04, except that the FASB has decided to hold off on and revisit at a later date the requirement for a quantitative sensitivity analysis relating to possible changes in significant inputs used to measure Level 3 items. Additionally, the sensitivity disclosures for Level 3 fair value measurements will not be required for nonpublic entities.

Read the full article at the BPM website