United States

Proposed changes to fair value measurement disclosures


As part of its disclosure framework project, the Financial Accounting Standards Board (FASB) recently issued a proposed Accounting Standards Update (ASU), Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The proposed ASU applies the provisions of the proposed Concepts Statement, Conceptual Framework for Financial Reporting: Chapter 8: Notes to Financial Statements, resulting in the proposed removal, modification and addition of certain disclosure requirements of Topic 820.

If finalized, the amendments in the proposed ASU would remove the following disclosure requirements from Topic 820:

  • The amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy
  • The policy for timing of transfers between levels
  • The valuation policies and procedures for Level 3 fair value measurements
  • For private companies, the change in unrealized gains and losses for the period included in earnings (or changes in net assets) on recurring Level 3 fair value measurements held at the end of the reporting period

In addition, the following disclosure requirements in Topic 820 would be modified:

  • Private companies no longer would be required to provide a reconciliation of the opening balances to the closing balances of recurring Level 3 fair value measurements. However, private companies would be required to disclose transfers into and out of Level 3 of the fair value hierarchy and purchases and issues of Level 3 assets and liabilities.
  • For investments in certain entities that calculate net asset value, the disclosure of the timing of liquidation of an investee’s assets and the date when restrictions from redemption will lapse only would be required if the investee has communicated the timing to the entity or announced the timing publicly.
  • The measurement uncertainty disclosure would be clarified to communicate information about the uncertainty in measurement as of the reporting date, rather than information about sensitivity to changes in the future.

Further, the following disclosure requirements would be added to Topic 820, but would not be required for private companies:

  • The changes in unrealized gains and losses for the period included in other comprehensive income and earnings (or changes in net assets) for recurring Level 1, Level 2 and Level 3 fair value measurements held at the end of the reporting period, disaggregated by level
  • For Level 3 fair value measurements, the range, weighted average and time period used to develop significant unobservable inputs

The proposed amendments also would include language to promote the use of discretion and reinforce that an entity can assess disclosures on the basis of whether they are material. The proposed ASU is available for comment until February 29, 2016.