Fair Value Measurements

Date recorded:

The staff presented their analysis of comments received on the IASB's discussion paper on fair value measurement. The discussion paper was issued as a 'wrap around' of FASB Statement of Financial Accounting Standards No. 157. The complete analysis is available in the Observer Notes section on the IASB's website (Agenda Paper 2C).

The staff asked the Board to do the following:

  • consider the main points raised in the comment letters (136 received);
  • affirm the project objectives; and
  • approve the staff's preliminary project plan.

The main points raised in the comment letter by constituents included (please refer to Agenda Paper 2C for a detailed analysis):

  • General agreement to that the fair value measurement project is needed;
  • Concerns about how to provide guidance on determining fair value when it is not clear in which circumstances;
  • The interaction between the fair value measurement project and the conceptual framework project (in particular, phase C which covers measurement);
  • The view that in many situations an entry price notion is superior to an exit price notion;
  • Fair value is more akin to a heading for a 'family' of measurement bases and accordingly terms should be used which are more descriptive (that is, more clearly articulate what the Board's intended measurement basis in that situation is); and
  • With regard to measuring liabilities at fair value, the respondents raised concerns about the application of a transfer notion instead of a settlement notion and asked for guidance as to the meaning of non-performance risk.

Regarding the interaction between this project and the Conceptual Framework project, some Board members noted that the outcome of this project is only one of a number of possible measurement bases that will be in the revised Framework. Consequently, the impact on the Framework project is only minor. The staff confirmed that it consults with staff of the Framework project on a regular basis.

Some Board members observed that the notion 'entry price' should be as well defined as 'exit price'. Staff noted that this is part of the proposed project plan.

No decisions were made.

The Board was also asked to agree on the following project objectives:

  • Development of principles and measurement guidance for an exit price measurement basis; and
  • Completion of a standard-by-standard review of fair value measurements permitted or required in IFRSs to asses whether each standard's measurement basis is an exit price. If the Board does not agree, will it agree to decide on a case-by-case basis whether or not to develop measurement guidance for those other measurement bases.

The Board agreed to both objectives. On the second bullet point, it was clarified that this analysis will not lead to the development of additional guidance for those measurement bases that will be identified as not fitting in the definition of fair value for the purpose of the fair value measurement project. However, the Board noted that a working definition for fair value must first be agreed on before the analysis can be done.

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