Deloitte comment letter on the IASB's proposed changes to fair value measurements

  • Deloitte Comment Letter Image

08 Sep, 2010

Deloitte's IFRS Global Office has submitted a letter of comment to the IASB on exposure draft ED/2010/7 Measurement Uncertainty Analysis Disclosure for Fair Value Measurements, which was published in June 2010.

The exposure draft proposed minor amendments to the May 2009 ED on fair value measurement. The May 2009 ED proposed a three-level fair value hierarchy that categorises observable and non-observable market data used as inputs for fair value measurements. Under that hierarchy, Level 3 inputs are 'unobservable inputs' used for the fair value measurement of assets or liabilities for which market data are not available. Required disclosures would include a 'measurement uncertainty analysis' (sometimes called a 'sensitivity analysis'). The June 2010 ED would enhance the original proposal by requiring the measurement uncertainty analysis disclosure to reflect the interdependencies between unobservable inputs used to measure fair value in Level 3.

Below is an excerpt from the comment letter:

We support the Board’s efforts to enhance the disclosures for fair value measurements that are categorised within Level 3 of the fair value hierarchy and the concept of a measurement uncertainty analysis disclosure for Level 3 fair value measurements. However, we have concerns about whether the proposed measurement uncertainty disclosure in the ED is operational. Entities are likely to encounter operational difficulty in applying the proposed guidance because of a lack of clarity about:

  • the threshold for identifying alternative inputs;
  • the inputs to use when there is a range of reasonable inputs and which techniques to use when there are multiple techniques (each with a range); and
  • the objective of the correlation assessment.

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