Fair value measurement

Date recorded:

The IASB discussed the final two topics on the fair value measurement project, both related to disclosure of fair value measurements.

IAS 19 plan assets measured at fair value

The exposure draft Fair Value Measurement had originally proposed to require fair value measurement disclosures for each category of plan assets under IAS 19 Employee Benefits, unless the deferred recognition model were utilised.

However, in the IASB's project to amend IAS 19 the Board has decided that disclosures about the fair value of plan assets were unnecessary because the entity did not hold those assets directly and therefore does not necessarily have information about the assumptions, inputs and a valuation techniques used. This decision contradicts the FASB's requirements for fair value disclosures related to employee benefit plans; however those disclosure requirements are part of ASC Topic 715 Compensation - Retirement Benefits rather than part of ASC Topic 820 Fair Value Measurements and Disclosures.

As a result, the Board tentatively agreed to exclude plan assets measured at fair value in IAS 19 from the scope of the fair value disclosure requirements. Doing so will not create a divergence in the fair value Standard issued by each Board.

IAS 36 asset impairments

The exposure draft Fair Value Measurement did not distinguish between recurring and non-recurring fair value measurements as IFRS does not have non-recurring fair value measurements (e.g., impairments are recorded at recoverable amount which is the higher of fair value less cost to sell and value in use). Comment letter respondents have requested similar information to be provided for impairments under both US GAAP and IFRS.

The IASB staff recommended that when the recoverable amount of an asset is determined based on fair value less costs to sell in IAS 36, an entity should disclose:

  • the amount of the fair value measurement
  • the level within the fair value hierarchy
  • any changes to the valuation technique and reasons for the change
  • quantitative information about significant inputs used in measuring fair value,
  • whether the highest and best use differs from the current use.

Certain Board members expressed varying level of concern with the proposals. Those concerns included that IAS 36 already proscribed disclosure requirements to the proposals requiring information that may not be overly relevant. For example, the requirement to disclose the change in the valuation technique would likely have no relevance for an impairment measurement as there would not be a recurring fair value measurement. However, the Board ultimately agreed with the staff proposals.

Next steps

These discussions finalised the Board's decisions with respect to the fair value measurement requirements. The Board approved the staff's request to begin drafting of the final Standard and no Board members expressed their intent to dissent. The staff will come back to the Board in early 2011 to discuss the effective date of the Standard.

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