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FASB and IASB Make More Progress on Fair Value

By Michael Cohn
March 24, 2010

The Financial Accounting Standards Board and the International Accounting Standards Board have been hashing out various issues surrounding fair value measurement, leases and other topics at a joint meeting this week.

For example, they have arrived at a definition of “class” in disclosures about fair value measurement. According to a summary of the board decisions published online, this entails defining “class” on the basis of the following principles: “An entity should determine the appropriate classes of assets and liabilities based on the nature, characteristics and risks of the assets and liabilities, and their classification in the fair value hierarchy. A class of assets and liabilities will often require greater disaggregation than the entity's line items in the statement of financial position. Judgment is needed to determine the appropriate classes of assets and liabilities.”

The two boards also decided not to require an entity to disclose information about the change in the nonperformance risk of a nonfinancial liability, and to require an entity to disclose its policy for determining when transfers between levels of the fair value hierarchy are recognized.

The boards have been discussing presentation requirements for lessors and lessees, as well as the lessor accounting model. The boards tentatively decided that “repayments of the lease receivable would be classified as operating activities in the statement of cash flows, and interest income arising from the lease receivable would be classified as operating activities in the statement of cash flows.”

The boards have also been discussing revenue recognition and consolidation, among other issues. As the two boards continue discussions, they may yet reach their goal of settling many of the outstanding issues by June 2011, but the clock continues to tick. For more information on the board decisions and tentative decisions at the joint meeting, click here.


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