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Fair Value Measurements

Date recorded:

The staff began the morning session by informing the Board about the latest developments in relation to the implementation of SFAS 157 Fair Value Measurements which is the basis for the Discussion Paper published by the IASB. The developments included the deferral of the effective date of SFAS 157 for non-recurring measurements (for example in business combinations). It was noted that these developments would have no impact on the IASB project on fair value measurements.

The staff presented its preliminary definitions of 'current exit price' and 'current entry price' for assets and liabilities that will be used in the standard-by-standard review. The Board and the staff reiterated that they do not want to change the measurement within the standards. The goal of the analysis carried out by the staff would be to find out which measurement attribute the Board and its predecessor (the IASC) had in mind when using the term 'fair value'.

The preliminary working definitions of the staff are as follows:

  • Assets:
    • Current entry price: The price that would be paid to buy an asset in an orderly transaction between market participants at the measurement date.
    • Current exit price: The price that would be received to sell an asset in an orderly transaction between market participants at the measurement date.
  • Liabilities:
    • Current entry price: The price that would be received to incur a liability in an orderly transaction between market participants at the measurement date.
    • Current exit price I (transfer notion): The price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date.
    • Current exit price II (settlement notion): The price that would be paid to settle a liability in an orderly transaction at the measurement date.
At the request of a Board member staff confirmed that possible components of fair value will be addressed in later stages of the project. The staff also confirmed that it will involve practitioners to gain insight into current valuation practice in the specific circumstances.

The Board had a short discussion on certain aspects of fair value measurement and was informed by staff that some of the issues will be discussed at the December Board meeting.

The Board agreed on the preliminary definitions of current entry price and current exit price for assets and liabilities and that staff should not consider other measurement bases for the purpose of the standard-by-standard review.

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