FASB, IASB mull fair value changes
The Financial Accounting Standards Board and the International Accounting Standards Board have each recently issued
exposure drafts proposing changes in the standards for fair
value measurement and disclosure in U.S. GAAP and International Financial Reporting Standards.
Simultaneous exposures aim to clarify and unify fair value rules
FASB’s proposed Accounting Standards
Update contains amendments that the boards
believe would improve the comparability of
fair value measurements presented and disclosed in financial statements prepared in
accordance with U.S. GAAP and IFRS.
The proposed update is the result of joint
efforts to ensure that fair value will have the
same meaning under U.S. GAAP and IFRS,
and that their respective measurement and
disclosure requirements will be virtually
the same, except for minor differences. The
amendments would apply to all reporting entities that are required or permitted to measure or disclose the fair value of an asset, a
liability, or an instrument classified in shareholders’ equity in financial statements.
The IASB is also publishing a measurement
uncertainty analysis disclosure proposal,
Measurement Uncertainty Analysis Disclosure
for Fair Value Measurements, which is the
same as a proposed disclosure requirement
in FASB’s proposed update. Both boards will
jointly consider the comments received on
their respective exposure drafts as they con-
tinue their discussions about fair value mea-
surement after the exposure periods end.
As part of their ongoing flood of
projects, the Financial Accounting
Standards Board and the International
Accounting Standards Board have also
jointly published a draft standard to improve and align the financial reporting
of revenue from contracts with customers and the related costs.
The proposed standard would
replace IAS 18, Revenue, IAS 11,
Construction Contracts, and related
interpretations. In U.S. GAAP, it would
supersede most of the guidance on
revenue recognition in Topic 605 of the
Accounting Standards Codification.
The core principle of the draft stan-
dard is that an entity should recognize
revenue from contracts with customers
when it transfers goods or services to
the customer in the amount of consid-
eration the entity receives, or expects
to receive, from the customer.
In developing the proposals, the
boards considered more than 220
comment letters they received on
a discussion paper, in addition to
feedback received from interested
parties through an extensive outreach
program, including workshops with
preparers. The boards will undertake
further outreach activities during the
exposure draft’s comment period to
ensure that the views of all interested
parties are taken into consideration
when finalizing the standard.
The exposure draft, Revenue from
Contracts with Customers, is open for
comment until Oct. 22, 2010, and can
be accessed on www.iasb.org or on
following topics covered in ASC 820: highest
and best use and valuation premise; measuring the fair value of financial instruments
within a portfolio and financial instruments
classified in shareholders’ equity; blockage
factors and other premiums and discounts;
and additional disclosures.
The comment period for FASB’s proposed
update extends through Sept. 7, 2010. The
proposed ASU does not yet specify an effective date; however, FASB plans to add one
after considering the comments it receives.
In the IASB’s draft, the board has proposed
a three-level fair value hierarchy that categorizes observable and non-observable market
data used as inputs for fair value measurements. According to that hierarchy, Level 3
inputs are “unobservable inputs” used for the
measurement of assets or liabilities for which
market data are not available.
In response to the comments it has received on earlier drafts of the standards, the
IASB proposes to enhance its original proposal by requiring the measurement uncertainty analysis disclosure to reflect the inter-dependencies between unobservable inputs
used to measure fair value in Level 3. Statement users commented that this information
would allow them to assess the effect that the
use of different unobservable inputs would
have had on the fair value measurement.
“Companies impacted by fair value measurements should stay informed of these
proposed changes, particularly as this ED
moves swiftly to a finalized standard,” said
Forsythe. “Investors, regulators and lawmakers are focusing more intently than ever on
how companies value assets.”
Measurement Uncertainty Analysis Disclosure for Fair Value Measurements is also open
for comment until Sept. 7, 2010.
FASB is publishing the proposals in the exposure draft Amendments for Common Fair
Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS. Both boards
will consider the comments received on the
exposure drafts jointly.
The drafts are available on the boards’ Web
sites. The IASB also plans to publish on its site
a comprehensive summary of the progress of
its fair value project, of which these proposals
form a part. AT
GASB LOOKS TO IMPROVE
NORWALK, CONN. — The Governmental
Accounting Standards Board has issued a
document outlining its preliminary views
on how to improve pension accounting
and financial reporting by government
employers. The approach presented
in the preliminary views would move
governmental pension accounting and
reporting away from the funding orientation that now exists, and instead introduce recognition and measurement standards that would be based on GASB’s
conceptual framework, including information that would help financial statement
users better assess the degree to which
inter-period equity has been achieved.
The document is available for down-load at www.gasb.org. The deadline for
submitting comments is Sept. 17, 2010.
GASB will host public hearings on the
issue in Dallas, San Francisco and New
York in mid-October.
FRAUD COSTS COMPANIES
AN AVERAGE OF $105K
AUSTIN, TEXAS — The median fraud loss for
U.S. organizations is $105,000, according
to a new study by the Association of Certified Fraud Examiners, with billing and
corruption schemes the most common
types of fraud reported.
Among the 1,021 U.S. cases in
the study, the median fraud loss was
$105,000. Billing schemes were present in 27.6 percent of these cases, while
corruption was reported in 21. 9 percent.
While 46.2 percent of U.S. frauds in the
study were committed by lower-level
employees who caused a median fraud
loss of $50,000, it was the 17. 1 percent of
frauds committed by owners and executives that did the most damage, with a
median loss of $485,000. Another 36. 7
percent of frauds committed by managers had a median loss of $150,000.
Anonymous fraud hotlines have made
a major impact, with 37. 8 percent of the
U.S. frauds in the study detected through
tips. Management review detected 17. 1
percent, and internal audit detected 13.7
percent of the frauds.
The “2010 Report to the Nations” is
available online at www.acfe.com/rttn.