An Update on NAV Per Share – ASU 2015-07

On Friday, May 1, 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2015-07, Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent).

The amendments apply to reporting entities that elect to measure the fair value of an investment using the net asset value per share (or its equivalent) practical expedient. Read our previous article on this topic.

Under Topic 820, a reporting entity is permitted, as a practical expedient, to estimate the fair value of certain investments using those investments’ NAV per share.

Prior to ASU 2015-07, these investments were categorized in the fair value hierarchy as Level 2 or Level 3, based on whether the investment was redeemable with the investee at net asset value on the measurement date, never redeemable with the investee at net asset value, or redeemable with the investee at net asset value at a future date.

These criteria were different than the criteria used for all other investments.

All other investments are categorized based on inputs to the fair value.

To alleviate inconsistencies in the categorization of investments within the hierarchy, ASU 2015-07 removes the requirement to categorize all investments for which fair value is measured using the net asset value per share practical expedient.

The amendments also clarify that certain disclosure requirements are limited to investments for which the entity has elected to measure the fair value using that practical expedient, and not all investments eligible to be measured at fair value using the practical expedient.

The ASU is essentially effective for public entities beginning in 2016 and for all other entities beginning in 2017, but earlier application is permitted. Entities should apply the amendments retrospectively to all periods presented.

We will be happy to provide further information relating to this subject. For more information, contact Craig B. Evans, Manager, Audit & Accounting and member of Kreischer Miller’s Investment Industry Group at or 215.441.4600.

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