United States

Changes to fair value measurement disclosure requirements

FINANCIAL REPORTING INSIGHTS  | 

As part of its disclosure framework project, the Financial Accounting Standards Board (FASB) recently issued Accounting Standards Update (ASU) 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The ASU applies the provisions of recently released Chapter 8, “Notes to Financial Statements,” of the FASB’s Conceptual Framework for Financial Reporting, resulting in the removal, modification and addition of certain disclosure requirements.

ASU 2018-13 removed 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 processes for Level 3 fair value measurements
  • For nonpublic entities, the changes in unrealized gains and losses for the period included in earnings for recurring Level 3 fair value measurements held at the end of the reporting period

The following disclosure requirements were modified in Topic 820:

  • In lieu of a rollforward for Level 3 fair value measurements, a nonpublic entity is 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, an entity is required to disclose the timing of liquidation of an investee’s assets and the date when restrictions from redemption might lapse only if the investee has communicated the timing to the entity or announced the timing publicly.
  • The amendments clarify that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date.

The following disclosure requirements were added to Topic 820; however, the disclosures are not required for nonpublic entities:

  • The changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period
  • The range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements

The ASU also clarifies that materiality is an appropriate consideration of entities and their auditors when evaluating disclosure requirements. The ASU is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted.