Fair Value Measurement

Date recorded:

Measuring the Fair Value of Alternative Investments

The Board considered the requirements under US GAAP (ASU 2009-12 Investments in Certain Entities that Calculate Net Asset Value per Share (or its equivalent)).

The Board agreed not to provide a practical expedient by allowing entities applying IFRSs to use net asset value (NAV) as an estimate of fair value for alternative investments. The Board was concerned that such a practical expedient would be not operational as under IFRSs there are not specific accounting requirements how to calculate the NAV.

Some Board members noted that in many cases the NAV would be the best estimate of fair value as NAV would be the exit price of the investment. On the other hand, in different fact patterns NAV would be inconsistent which the objective of fair value measurement (for example, investment that could be redeemed at NAV, which consists of investment of that generates higher return). Therefore, the Board decided not to include the US guidance that is jurisdiction specific in the Fair Value Measurement Standard and explain its rationale in the Basis for Conclusions.

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