Proposed Update to Fair Value Disclosure Requirements

In December 2015, the Financial Accounting Standards Board (FASB) issued a proposed Accounting Standards Update, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. The proposal is an element of the FASB’s broader disclosure framework project. This project is expected to promote the use of discretion by entities when assessing disclosure requirements, with the hope of improving the level of effectiveness of the financial statement footnotes.

The proposed update is still in the review period, and therefore open for public comment. Comments are due February 29, 2016.

Topic 820 provides a single purpose framework for measuring fair value, while requiring specific fair value measurements and/or disclosures. The FASB has proposed revising and removing specific fair value measurement disclosures for all entities, and adding new disclosures for public entities, not-for-profit entities, and employee benefit plans.

The goal of this proposal is to increase the efficiency of the disclosure requirements for all entities, and to further eliminate the number of disclosures for private companies. Some of the key changes are as follows:

  1. There will be no need to disclose the amount of, and reasons for, transfers between Level 1 and Level 2 nor will there be a requirement to disclose the policy for timing of transfers between levels of the fair value hierarchy.
  2. For private companies, there will no longer be a requirement to reconcile opening balances to closing balances of recurring Level 3 fair value measurements, but they will have to disclose transfers into and out of Level 3 of the hierarchy, as well as purchases and issues of Level 3 items.
  3. Public entities, not-for-profit entities, and employee benefit plans will be required to disclose the changes in unrealized gains and losses for the period, included in other comprehensive income and earnings (or changes in net assets), for recurring Level 1, Level 2, and Level 3 fair value measurements held at the end of the reporting period.

If the proposed update is accepted, entities would have several modifications and eliminations to their disclosures, either due to inconsistencies or no longer being applicable. We recommend that firms research this topic in order to determine the effects it might have on their financial statements. Firms should consider whether this proposed amendment will result in more direct and useful information about fair value measurements.

We will be happy to provide further information relating to this subject. For more information, contact Meghan DiDonato, Senior, Audit & Accounting at


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