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Journal entry — Fair value — FASB decides scope of potential exemption of certain nonpublic entities from select fair value disclosures

Published on: Apr 30, 2012

In November 2011, the FASB added a project to its agenda to address concerns expressed by nonpublic entities regarding the cost and complexity of required disclosures about fair value measurements. At last week’s meeting, the Board tentatively decided to exclude from the scope of the project (1) nonpublic entities with substantially all assets measured at fair value on a recurring basis and (2) not-for-profit entities.

Editor’s Note: The Board also directed the staff to solicit input from stakeholders related to its tentative decision to exclude not-for-profit entities from this project.

The tentative decisions do not affect ASC 820-10-50-2F,1 which exempts nonpublic entities from the following disclosure requirements:

  • Transfers between Levels 1 and 2 of the fair value hierarchy.
  • A narrative description of the sensitivity of Level 3 fair value measurements to changes in unobservable inputs.
  • The disclosures in ASC 820-10-50-2E related to each class of assets and liabilities not measured at fair value in the statement of financial position but for which fair value is disclosed.

The disclosure requirements in ASC 820-10-50-2E from which nonpublic entities are exempt include:

  • The level of the fair value hierarchy within which the fair value measurement is categorized.
  • A description of the valuation technique(s) and the inputs used in fair value measurements categorized within Levels 2 and 3, changes in these valuation techniques, and the reasons for any change in technique.
  • The current use of nonfinancial assets measured at fair value for which there is a different highest and best use.

Because nonpublic entities with substantially all assets measured at fair value on a recurring basis and not-for-profit entities will be excluded from the scope of this project, these entities will continue to provide disclosures about fair value measurements otherwise required by ASC 820 or other applicable ASC Topics.

At last week’s meeting, the FASB staff also presented a summary of its research and outreach in connection with understanding preparers’ concerns related to fair value disclosures and users’ views about the relevance of these disclosures. In response, the FASB directed the staff to perform targeted outreach to gather information about whether a narrative disclosure describing significant changes in fair value measurements categorized within Level 3 of the fair value hierarchy would be a cost-effective alternative to tabular reconciliations from the opening to closing balances for:

  • Derivative assets and liabilities (see ASC 820-10-50-3).
  • Pension and postretirement plan assets (see ASC 715-20-50-5(c)(5)(iv)(02)).
  • All other assets and liabilities measured under Level 3 of the fair value hierarchy on a recurring basis (see ASC 820-10-50-2(c)).


[1] For titles of FASB Accounting Standards Codification references, see Deloitte’s "Titles of Topics and Subtopics in the FASB Accounting Standards Codification."

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