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FASB Accounting Standards Updates No. 2018-13 —Fair Value Measurement (Topic 820) —Disclosure Framework —Changes to the Disclosure Requirements for Fair Value Measurement

Fair Value - AICPA Issues New Technical Questions and Answers

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FASB Accounting Standards Updates No. 2018-13 —Fair Value Measurement (Topic 820) —Disclosure Framework —Changes to the Disclosure Requirements for Fair Value Measurement

Summary - The FASB has issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement.

ASU No. 2018-13 modifies the disclosure requirements on fair value measurements in Topic 820 as follows:

Removals

The following disclosure requirements were removed from Topic 820:

  • The amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy;
  • The policy for timing of transfers between levels;
  • The valuation processes for Level 3 fair value measurements; and
  • For nonpublic entities, the changes in unrealized gains and losses for the period included in earnings for recurring Level 3 fair value measurements held at the end of the reporting period.

Modifications

The following disclosure requirements were modified in Topic 820:

  • In lieu of a rollforward for Level 3 fair value measurements, a nonpublic entity is required to disclose transfers into and out of Level 3 of the fair value hierarchy and purchases and issues of Level 3 assets and liabilities;
  • For investments in certain entities that calculate net asset value, an entity is required to disclose the timing of liquidation of an investee’s assets and the date when restrictions from redemption might lapse only if the investee has communicated the timing to the entity or announced the timing publicly; and
  • The amendments clarify that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date.

Additions

The following disclosure requirements were added to Topic 820; however, the disclosures are not required for nonpublic entities:

  • The changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period; and
  • The range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. For certain unobservable inputs, an entity may disclose other quantitative information (such as the median or arithmetic average) in lieu of the weighted average if the entity determines that other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop Level 3 fair value measurements.

In addition, the amendments eliminate at a minimum from the phrase “an entity shall disclose at a minimum” to promote the appropriate exercise of discretion by entities when considering fair value measurement disclosures and to clarify that materiality is an appropriate consideration of entities and their auditors when evaluating disclosure requirements.

Effective Date

The amendments in ASU No. 2018-13 are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.

The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date.

Early adoption is permitted. An entity is permitted to early adopt any removed or modified disclosures upon issuance of ASU No. 2018-13 and delay adoption of the additional disclosures until their effective date.

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© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

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Fair Value - AICPA Issues New Technical Questions and Answers

Summary - The AICPA has released a new Technical Question and Answer (TQA) and amendments for TQA Section 2220, Long-Term Investments.
 
Technical Questions and Answers
The new TQA is Section 2220.28, Definition of Readily Determinable Fair Value and Its Interaction With the NAV Practical Expedient. The amendments include changes as follows:
  • Amendments to TQA section 2220.18, "Applicability of Practical Expedient;"
  • Deletion of TQA section 2220.24, "Disclosures-Ability to Redeem Versus Actual Redemption Request;" and
  • Deletion of TQA section 2220.25, "Impact of 'Near Term' on Categorization Within Fair Value Hierarchy."
The AICPA developed TQA Sections 2220.18-.28 to assist reporting entities in implementing FASB ASC 820, Fair Value Measurements, to estimate the fair value of investments in certain entities that calculate net asset value. Sections 2220.18-.27 apply to investments that are required to be measured and reported at fair value and are within the scope of paragraphs 4-5 of FASB ASC 820-10-15.
 
New Section 2220.28 provides guidance in interpreting and applying the FASB Master Glossary definition of "readily determinable fair value." 
For more information, click here.
 
© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.