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Journal entry — Classification and measurement of financial instruments — FASB to exempt nonpublic entities from fair value disclosures about financial instruments at amortized cost

Published on: Aug 10, 2012

Yesterday, the FASB tentatively decided to exempt all nonpublic entities from the requirement to present or disclose fair value measurements for financial instruments measured at amortized cost.

The FASB expects to expose its proposed amendments to the classification and measurement of financial instruments for public comment in the fourth quarter of 2012.

Editor’s Note: This tentative decision would be a change in U.S. GAAP for nonpublic entities with (1) total assets equal to or greater than $100 million or (2) less than $100 million in total assets that account for certain of their instruments as derivatives.1 Such nonpublic entities would no longer be required to provide fair value measurements for financial instruments measured at amortized cost.

The FASB is also working on a project to amend the definition of nonpublic entity under U.S. GAAP. The Board has not yet exposed proposed changes to the definition of nonpublic entity for public comment; however, it did release details of related tentative decisions in a discussion paper on a proposed private-company decision-making framework that the FASB and Private Company Council would use to determine whether modifications or exceptions to existing and proposed U.S. GAAP are warranted for private companies. See Deloitte’s August 7, 2012, Heads Up for more information on this discussion paper.

 

[1] Under FASB Accounting Standards Codification Topic 825, Financial Instruments, nonpublic entities that meet the following criteria are not required to disclose fair value information in their annual or interim financial statements:

  • “The entity’s total assets are less than $100 million on the date of the financial statements.”
  • “The entity has no instrument that, in whole or in part, is accounted for as a derivative instrument under [FASB Accounting Standards Codification Topic 815, Derivatives and Hedging] other than commitments related to the origination of mortgage loans to be held for sale during the reporting period.”

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