A new Financial Accounting Standards Board disclosure requirement makes several material changes to U.S. GAAP. New requirements for determining the fair value disclosure of financial institutions’ loan portfolios are among the revisions.
The amendments require public business entities that have to disclose fair value of financial instruments measured at amortized cost on the balance sheet to measure that fair value using the exit price notion consistent with
FASB concluded that an entity is not required to revise its prior period disclosures of fair value for those financial instruments that may have been calculated using the entry price notion, which was an acceptable method under previous GAAP.
The new requirement also acknowledges that if an entity used an entry price notion to measure fair value in a prior period, then the disclosure of fair value in the periods after adoption of this new requirement may not be comparable with the new disclosures because those disclosures measure fair value using the exit price notion. In those cases, it was concluded that the entity should clarify in the notes to financial statements that the prior-period fair values disclosed are not determined in a manner consistent with the current-period fair values disclosed because of a change in the methodology.
FASB sought to reduce the complexity and costs for public business institutions that are required to disclose information about fair values of instruments measured at amortized cost. An entity is required to disclose only the level of the fair value hierarchy within which the fair value information falls.