Statement of Financial Accounting Standards No. 157 - Paper Audit ...

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that does not include an adjustment for risk would not represent a fair value measurement if market participants would include one in pricing the related asset or liability. C17. To improve transparency in financial reporting, the Board decided to require expanded disclosures about fair value measurements using significant unobservable inputs and the effects of such measurements on earnings. This Statement includes those expanded disclosure requirements (for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs) and nullifies the guidance in footnote 3 of Issue 02-3. Statement 114 C18. In the Exposure Draft, the Board decided to exclude FASB Statement No. 114, Accounting by Creditors for Impairment of a Loan, from the scope of this Statement. The Board clarified that the measurement for impaired loans, determined using a present value technique, is not a fair value measurement. Respondents agreed. However, they noted that the practical expedient in Statement 114 (observable market price or the fair value of collateral if the loan is collateral-dependent) is a fair value measurement. They said that when the practical expedient is used, the guidance in this Statement should apply. The Board agreed and decided to include Statement 114 in the scope of this Statement as it relates to the practical expedient. Opinion 21 C19. In this Statement, the Board affirmed that the measurement for receivables and payables in APB Opinion No. 21, Interest on Receivables and Payables, determined using a present value technique, is a fair value measurement. The discount rate for contractual (promised) cash flows described in that Opinion (rate commensurate with the risk) embodies the same notion as the discount rate used in the traditional approach (or discount rate adjustment technique) described in FASB Concepts Statement No. 7, Using Cash Flow Information and Present Value in Accounting Measurements, and clarified in this Statement. Paragraph 13 of Opinion 21 explains: The objective is to approximate the rate which would have resulted if an independent borrower and an independent lender had negotiated a similar transaction under comparable terms and conditions with the option to pay the cash price upon purchase or to give a note for the amount of the purchase which bears the prevailing rate of interest to maturity. 52
C20. Accordingly, the guidance for using present value techniques to measure fair value in this Statement applies for the measurements required under Opinion 21. It also applies for the similar measurements required under other accounting pronouncements. Practicability Exceptions C21. The Board observed that some of the accounting pronouncements within the scope of this Statement permit practicability exceptions to fair value measurements in specified circumstances. Those practicability exceptions include the following: a. The use of a transaction price (an entry price) to measure fair value (an exit price) at initial recognition (guarantees under FASB Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, and financial assets and liabilities under FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities) b. An exemption to the requirement to measure fair value if it is not practicable to do so (financial instruments under FASB Statement No. 107, Disclosures about Fair Value of Financial Instruments, and financial assets obtained and financial liabilities incurred in a sale under Statement 140 and EITF Issue No. 85-40, “Comprehensive Review of Sales of Marketable Securities with Put Arrangements”) c. An exemption to the requirement to measure fair value if fair value is not reasonably determinable (nonmonetary assets under APB Opinion No. 29, Accounting for Nonmonetary Transactions, FASB Statement No. 153, Exchanges of Nonmonetary Assets, and EITF Issue No. 99-17, “Accounting for Advertising Barter Transactions”; asset retirement obligations under FASB Statement No. 143, Accounting for Asset Retirement Obligations, and FASB Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations; restructuring obligations under FASB Statement No. 146, Accounting for Costs Associated with Exit or Disposal Activities; and participation rights under FASB Statements No. 87, Employers’ Accounting for Pensions, and No. 106, Employers’ Accounting for Postretirement Benefits Other Than Pensions) d. An exemption to the requirement to measure fair value if fair value cannot be measured with sufficient reliability (contributions under FASB Statement No. 116, Accounting for Contributions Received and Contributions Made, and AICPA Audit and Accounting Guide, Not-for-Profit Organizations) e. The use of certain of the measurement methods referred to in paragraph 37 of FASB Statement No. 141, Business Combinations, that allow measurements other than fair value for certain assets acquired and liabilities assumed in a business combination. 53
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Financial Accounting Series NO. 284
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Summary This Statement defines fair
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(blockage factor). This Statement e
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instruments as of the beginning of
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Copyright © 2006 by Financial Acco
Page 13 and 14: Statement of Financial Accounting S
Page 15 and 16: disaggregated) for purposes of appl
Page 17 and 18: Application to Assets 12. A fair va
Page 19 and 20: of the elements in the transaction,
Page 21 and 22: paragraph 19). The disclosure provi
Page 23 and 24: sufficient to absorb the quantity h
Page 25 and 26: c. For fair value measurements usin
Page 27: 38. At the date this Statement is i
Page 30 and 31: A3. The judgments applied in differ
Page 32 and 33: include those buyers that initially
Page 34 and 35: participants have technology in a m
Page 36 and 37: elevant data points in the market a
Page 38 and 39: in the fair value hierarchy within
Page 40 and 41: the one- and two-year options on th
Page 42 and 43: tions in which the price in a trans
Page 44 and 45: higher of its fair value in-use as
Page 46 and 47: measure fair value are required in
Page 48 and 49: Assets Measured at Fair Value on a
Page 50 and 51: d. The price for bearing the uncert
Page 52 and 53: liability being measured, it may be
Page 54 and 55: cash flows, it likely will be highe
Page 57 and 58: Appendix C BACKGROUND INFORMATION A
Page 59 and 60: Appendix C BACKGROUND INFORMATION A
Page 61 and 62: Scope Share-Based Payment Transacti
Page 63: epresent the fair value of the inst
Page 67 and 68: clearly, the Board revised the defi
Page 69 and 70: or liability (for example, a commod
Page 71 and 72: Application to Liabilities C39. For
Page 73 and 74: whether changes in a debtor’s cre
Page 75 and 76: entity’s credit standing makes th
Page 77 and 78: Valuation Techniques C53. This Stat
Page 79 and 80: C60. In its discussions, the Board
Page 81 and 82: generally provide the most reliable
Page 83 and 84: not sufficient to absorb the quanti
Page 85 and 86: similar guidance in paragraph AG72,
Page 87 and 88: that indicates that market particip
Page 89 and 90: asset or liability. The Board concl
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Page 93 and 94: in the statement of financial posit
Page 95 and 96: adjustment to the opening balance o
Page 97: International Financial Reporting S
Page 100 and 101: Pronouncement Statement 65* Stateme
Page 102 and 103: Pronouncement Interpretation 45* In
Page 104 and 105: Pronouncement FSP AAG INV-1 and SOP
Page 106 and 107: the proceeds received or the presen
Page 108 and 109: services received in exchange, and
Page 110 and 111: E6. FASB Statement No. 19, Financia
Page 112 and 113: . Paragraph 8: Broadcasters may bar
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cost or marketfair value for each t
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and cost required for the buyer to
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significant, tThe fair value of an
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Statement describe possible additio
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the fair value of the services rece
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. Paragraph 112 (glossary), as amen
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ase the estimate of future cash flo
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ased on valuation techniques) used
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value of an asset (or liability) in
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securities. An acquiring entity oft
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as the basis for the measurement, i
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of those cash flows that are embodi
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current rate. Any downward revision
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current credit-adjusted risk-free r
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Date Incurred 12/31/03 12/31/04 12/
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market prices in active markets are
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Course of Action Cash Flows Estimat
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i. Paragraph A13: The following tab
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accordance with paragraph 7, the en
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expected present value technique of
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E29. Statement 133 Implementation I
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upon the assignment because the pro
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