FASB Chief Adds Agenda Project on Fair Value Measurement Disclosures

Jack Humphrey, Regulatory journalist
December 06, 2011 /

The Financial Accounting Standards Board (FASB) has added to its agenda a project to assess the feasibility of reducing or eliminating certain fair value measurement disclosure requirements for private companies and not-for-profit organizations.

The decision by FASB Chairman Leslie F. Seidman to add the agenda project was based on comments received during private company roundtable discussions held in October.

The project will evaluate the need for existing disclosure requirements for private companies and not-for-profits for fair value measurements categorized within Level 3 of the fair value hierarchy. Level 3 refers to fair value measurements that are determined using significant unobservable inputs, such as expected future growth rates.

The project will include conducting targeted outreach to private company and not-for-profit stakeholders, particularly investors, lenders, donors, and other users, to assess the relevance of existing Level 3 fair value measurement disclosure requirements.

“FASB selected this project because of pervasive concerns expressed by nonpublic entity stakeholders regarding existing fair value disclosures, particularly that many of the requirements are irrelevant to their financial statement users and are very costly to prepare,” said Ms. Seidman.

“The input that we received during our recently held private company roundtable discussions was invaluable, and the relevance of existing fair value disclosures was top-of-mind for private companies,” said Marc Siegel, FASB Board member.

“Board members felt that a project should be undertaken to further explore whether private companies and not-for-profit organizations should be exempt from providing some disclosures about Level 3 fair value measurements.”


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