The Financial Accounting Standards Board has issued a standard providing companies with an option to report selected financial assets and liabilities at fair value.
The standard’s objective is to reduce both complexity in accounting for financial instruments and the volatility in earnings caused by measuring related assets and liabilities differently.
The statement, FAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities,” should reduce the need for companies to comply with detailed rules for hedge accounting. The statement also establishes presentation and disclosure requirements designed to simplify comparisons between companies that choose different measurement attributes for similar types of assets and liabilities.
The standard requires companies to provide information helping financial statement users to understand the effect of a company’s choice to use fair value on its earnings, as well as to display the fair value of the assets and liabilities a company has chosen to use fair value for on the face of the balance sheet.
The statement is effective as of the beginning of an entity’s first fiscal year beginning after Nov. 15, 2007. Early adoption is permitted as of the beginning of the previous fiscal year, provided that the entity makes that choice in the first 120 days of that fiscal year.
The full announcement and statement is available at
