Objective
In step with its mission to improve and enhance the quality, consistency, and comparability of financial statements, the FASB continues to assess whether and to what extent additional and more specific valuation guidance is needed for financial reporting purposes beyond the guidance provided in FASB Statement No. 157, Fair Value Measurements. The Board seeks to solicit the views of its constituents through the formation of a resource group tasked with assisting the Board in matters involving valuation for financial reporting purposes.
The Valuation Resource Group (VRG) will provide the FASB staff with information on the existing implementation issues surrounding fair value measurements used for financial statement reporting purposes and the alternative viewpoints associated with those implementation issues. The VRG’s meetings are closed to the public and minutes are not distributed. The meetings are closed since this group does not make any authoritative decisions. Any authoritative decisions are subject to the FASB’s normal open due process, including open deliberation by the Board.
*Issues Discussed to Date
Summary of discussions to date
The issues discussed at the October 1, 2007 meeting include:
Determining the fair value of an asset in which the entity intends to transform the asset from its current form into a different form upon sale (such as whether to value a mortgage loan in the whole loan market vs. the securitization market)
Definition of an active market
Determination of the principal market when the majority of an entity’s trading activity occurs in a different market than where the majority of market participants’ trading occurs.
Highest and Best Use: Accounting for an asset that an entity does not intend to use or intends to use defensively
Determination of market participants (such as assets or entities acquired in an auction)
Assets and liabilities without markets
Pension plan disclosures
Use of net asset value to measure certain investments, such as in private equity.
The issues discussed at the November 9, 2007 meeting include:
Deferral of the effective date of FASB Statement No. 157, Fair Value Measurement
Development of market participant assumptions and use of an entities own data (similar to issue discussed at October 1, 2007 meeting)
Unit of valuation and exit markets, whether unit of valuation can be more disaggregated than the unit of account (similar to issue discussed at October 1, 2007 meeting)
Measurement of liabilities
Applicability of Statement 157 to plan assets of pensions and other postretirement benefit plans (similar to issue discussed at October 1, 2007 meeting)
Use of NAV to measure investments in fund of fund or certain investments with restrictions (similar to issue discussed at October 1, 2007 meeting)
Determining the fair value of a liability with a third-party guarantee
Highest and best use - land example
Definition of significant in determining the level in the fair value hierarchy
Accounting for Transaction Costs in Determining the Fair Value of an Investment
The issues discussed at the February 1, 2008 meeting include:
Accounting for assets that the acquirer does not intend to use or intends to use in a way other than its highest and best use
Overlapping customer relationships
Valuation of intangible assets using "current replacement cost"
Meaning of "legally permissible" in assessing highest and best use
Allocation of portfolio based credit adjustments for hedge effectiveness testing
The issues discussed at the May 8, 2008 meeting include:
Observable vs. Unobservable Fair Value Measurements in the Current Credit Environment
Determining Whether a Discount should be Applied for a Restriction on Sale
Employee Benefit Plans
Contingent Liabilities
The FASB staff will evaluate which, if any, of these issues to present to the Board for their consideration to add to its technical agenda. At the November 14, 2007 Board meeting, the Board instructed the staff to issue proposed FASB Staff Positions to (1) amend the effective date of Statement 157 and (2) provide guidance that would clarify the principles in Statement 157 on the measurement of liabilities. The Board has also instructed the staff to proceed with a short-term project to expand the disclosures about plan assets under FASB Statement No. 132 (revised 2003), Employers' Disclosures about Pensions and Other Postretirement Benefits.
The next VRG meeting is scheduled for September 23, 2008.
Don Charles (accounting/valuation) |
Ernst & Young |
Brenna Wist (accounting/valuation) |
KPMG |
Greg Forsythe (accounting/valuation) |
Deloitte |
Andreas Ohl (accounting/valuation) |
PricewaterhouseCoopers |
Anita Ford (accounting/valuation) |
Clifton Gunderson |
Jolene Hart (accounting/valuation) |
McGladry & Pullen |
Jerry Mehm (valuation) |
American Appraisal |
Paul Barnes (valuation) |
Duff & Phelps |
Michael DeLuke (valuation) |
Houlihan , Lokey, Howard & Zukin |
Michael Mard (valuation) |
The Financial Valuation Group |
Chris Thorne (professional standard setting) |
International Valuation Standards Committee |
Carla Glass (professional standard setting) |
The Appraisal Foundation |
Amy Ripepi (accounting specialist) |
Financial Reporting Advisors |
Greg Ramsey (preparer) |
Fannie Mae |
Gina Weaver (preparer) |
Pfizer |
Dan Hugo (preparer – financial institution) |
Bank of America |
David Larsen (preparer – private equity) |
Duff & Phelps |
Gordon Goodman (preparer) |
Occidental Petroleum |
Rebecca McEnally (user) |
CFA Institute |
Wally Enman (user) |
Moodys |
Paul Glotzer (observer) |
FASB |
Shelley Luisi (observer) |
SEC |
Jeffrey Mechanick (observer) |
FASB |
Greg Scates (observer) |
PCAOB |
Hillary Eastman (observer) |
IASB |
Henri Venter (observer) |
IASB |
Dan Noll (observer) |
AICPA |
History and Background
In January 2007, the FASB issued an Invitation to Comment seeking views from constituents on (a) the need, if any, for valuation guidance related to the use of fair value measurements in financial reporting, (b) who should be involved in developing any such valuation guidance, and (c) the process and form of any such guidance-setting activities. Over 80 comment letters were received and posted to the FASB website. Additionally, the Board held a Public Roundtable public roundtable on April 30, 2007 to enable constituents to elaborate on and discuss the issues raised in the Invitation to Comment. The Board issued a press release on June 21, 2007 announcing the formation of a resource group to address issues relating to valuation for financial reporting. The resource group has met on October 1, 2007, November 9, 2007, February 1, 2008 and May 8, 2008 to discuss issues surrounding the implementation of FASB Statement No. 157, Fair Value Measurements.
