CCH Learning Center

Fair Value Measurements - SFAS No. 157 and No. 159

In June 2003, the FASB added a project to its agenda to codify and improve guidance for measuring fair value. In many recent pronouncements, the FASB has concluded that fair value information is relevant and users generally have agreed. At the same time, however, preparers, auditors, and others have expressed concerns about the ability to apply a fair value measurement principle. The FASB believes that in large part, those concerns resulted because there was limited application guidance for measuring fair value.

The only guidance that did exist, prior to the issuance of SFAS No. 157 and No. 159, had evolved “piece-meal” over time and was dispersed among the many pronouncements that require fair value measurements, as well as FASB Concepts Statement No. 7, Using Cash Flow Information and Present Value in Accounting Measurements. Differences in that guidance added to the complexity in GAAP. In addition, there was limited conceptual guidance for addressing measurement issues in the FASB’s conceptual framework.

In response to these concerns, FASB ultimately issued Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements, in September of 2006. Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No. 115, quickly followed and was released in February of 2007.

This course will review how SFAS No. 157 has impacted fair value measurement. Topics covered include:

• Recent decisions by the FASB that impact fair value measurement
• Descriptions of fair value and unit of account
• Valuation techniques
• Market inputs
• Fair value hierarchy
• Restricted securities
• Disclosures