The International Accounting Standards Board (IASB) and US Financial Accounting Standards Board (FASB) have proposed final changes to their fair value measurement rules ahead of a converged standard that is due for release early next year.
The IASB has proposed further enhancements to a disclosure proposal on Level 3 fair value measurements that formed part of its fair value measurement exposure draft published in May 2009.
In the 2009 draft, the IASB proposed a three-level fair value hierarchy that categorises observable and non-observable market data used as inputs for fair value measurements.
According to that hierarchy, Level 3 inputs are ‘unobservable inputs’ that are used for the fair value measurement of assets or liabilities for which market data are not available.
The new IASB proposals require the measurement uncertainty analysis disclosure to reflect the interdependencies between unobservable inputs used to measure fair value in Level 3.
The FASB exposure draft, Amendments for Common Fair Value Measurement and Disclosure Requirements in US GAAP and IFRSs, introduces amendments to US GAAP the boards believe would enhance the comparability of fair value measurement in US GAAP and IFRS.
Both boards will consider the comments received on the exposure drafts jointly.
Getting to the same answer
The objective of the fair value measurement project is to develop a converged definition and common implementation guidance.
This is necessary to achieving full convergence of any standards that require fair value measurement.
The new standard will not dictate when fair value should be used.
Both exposure drafts are open for comment until 7 September 2010.