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Disaggregation of Changes in Fair Value of Financial Instruments: Project Proposal

Date recorded:

The Board discussed a project proposal about providing disaggregation of changes in fair value of financial instruments. The staff noted that many financial instruments are already reported at fair value and there are specific requirements for reporting changes in those fair values in income, other comprehensive income, or equity. However, there are few requirements or guidelines for reporting disaggregated information about changes in fair value.

There was general agreement that users of financial statements have a vital need to understand the components of changes in fair value - that is, distinguishing changes related to cash flows (due to realisation, acquisitions, etc.) vs changes related to the instrument, issuer, and markets in general (credit risk, market risk, etc.) vs changes in the measurement model. The level of disaggregation need not be the same in all instances. For example, the effect of movements in credit risk would be more relevant in the case of a financial institution than for a manufacturer.

Several Board members were concerned about the dividing line between financial instruments issues and those related to the Board's project on reporting financial performance. They asked the staff to be sensitive to this border.

After a rather unstructured discussion, the Board agreed that the staff would return in October with a modified project proposal for a narrowly-focused project on disaggregating information on the changes in fair value of financial instruments.

It was also agreed that the IASB and FASB should have a strategic discussion about how to move forward on fair value for financial instruments. This would be added to the topics for the October joint FASB-IASB meeting.

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