The Financial Accounting Standards Board has released a summary of board decisions following its April 2 board meeting. The FASB decided the final FASB Staff Position (FSP) would represent the following:
- affirm that the objective of fair value when the market for an asset is not active is the price that would be received to sell the asset in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions (that is, in the inactive market);
- clarify and include additional factors for determining whether there has been a significant decrease in market activity for an asset when the market for that asset is not active;
- eliminate the proposed presumption that all transactions are distressed (not orderly) unless proven otherwise, and the FSP will instead require an entity to base its conclusion about whether a transaction was not orderly on the weight of the evidence;
- include an example that provides additional explanation on estimating fair value when the market activity for an asset has declined significantly;
- require an entity to disclose a change in valuation technique (and the related inputs) resulting from the application of the FSP and to quantify its effects, if practicable; and
- apply to all fair value measurements when appropriate.
The FASB has also affirmed its previous decision that the FSP would be applied prospectively and that retrospective application would not be permitted. The FASB has decided that the FSP would be effective for interim and annual periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009.
The board has directed the staff to proceed to a draft of the final FSP for vote by written ballot.
To read the summary in its entirety, visit www.fasb.org.