FASB adopts fair value option for financial instruments

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16 Feb 2007

The US Financial Accounting Standards Board has issued a standard that provides companies with an option to report selected financial assets and liabilities at fair value.

Statement 159 The Fair Value Option for Financial Assets and Financial Liabilitiesalso establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. FAS 159 is effective for an entity's first financial year beginning after 15 November 2007, with earlier adoption permitted. Under FAS 159, the fair value option:
  • May be applied instrument by instrument, with a few exceptions, such as investments otherwise accounted for by the equity method
  • Is irrevocable (unless a new election date occurs)
  • Is applied only to entire instruments and not to portions of instruments.
The FAS 159 fair value option is similar, but not identical, to the fair value option in IAS 39 Financial Instruments: Recognition and Measurement. The IAS 39 fair value option is subject to certain qualifying criteria not included in FAS 159, and it applies to a slightly different set of instruments. Click for FASB's News Release (PDF 58k). You can download FAS 159 from FASB's Website.

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