Fair Value Measurement (Topic 820) - FASB

1 fair Value Measurement ( topic 820 ) No. 2018-13 August 2018 Disclosure Framework Changes to the Disclosure Requirements for fair Value Measurement An Amendment of the FASB accounting Standards Codification The FASB accounting Standards Codification is the source of authoritative generally accepted accounting principles (GAAP) recognized by the FASB to be applied by nongovernmental entities. An accounting Standards Update is not authoritative; rather, it is a document that communicates how the accounting Standards Codification is being amended. It also provides other information to help a user of GAAP understand how and why GAAP is changing and when the changes will be effective.

2 For additional copies of this accounting Standards Update and information on applicable prices and discount rates contact: Order Department Financial accounting Standards Board 401 Merritt 7 PO Box 5116 Norwalk, CT 06856-5116 Please ask for our Product Code No. ASU2018-13. FINANCIAL accounting SERIES (ISSN 0885-9051) is published monthly with the exception of May, November, and December by the Financial accounting Foundation, 401 Merritt 7, PO Box 5116, Norwalk, CT 06856-5116. Periodicals postage paid at Norwalk, CT and at additional mailing offices. The full subscription rate is $255 per year. POSTMASTER: Send address changes to Financial accounting Series, 401 Merritt 7, PO Box 5116, Norwalk, CT 06856-5116.

3 | No. 472 Copyright 2018 by Financial accounting Foundation. All rights reserved. Content copyrighted by Financial accounting Foundation may not be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the Financial accounting Foundation. Financial accounting Foundation claims no copyright in any portion hereof that constitutes a work of the United States Government. An Amendment of the FASB accounting Standards Codification No. 2018-13 August 2018 fair Value Measurement ( topic 820 ) Disclosure Framework Changes to the Disclosure Requirements for fair Value Measurement accounting Standards Update Financial accounting Standards Board accounting Standards Update 2018-13 fair Value Measurement ( topic 820 ) Disclosure Framework Changes to the Disclosure Requirements for fair Value Measurement August 2018 CONTENTS Page Numbers Summary.

4 1 3 Amendments to the FASB accounting Standards Codification .. 5 24 Background Information and Basis for Conclusions .. 25 45 Amendments to the XBRL Taxonomy .. 46 Summary Why Is the FASB Issuing This accounting Standards Update (Update)? The Board is issuing the amendments in this Update as part of the disclosure framework project . The disclosure framework project s objective and primary focus are to improve the effectiveness of disclosures in the notes to financial statements by facilitating clear communication of the information required by generally accepted accounting principles (GAAP) that is most important to users of each entity s financial statements.

5 Achieving the objective of improving the effectiveness of the notes to financial statements includes: development of a framework that promotes consistent decisions bythe Board about disclosure appropriate exercise of discretion by reporting March 4, 2014, the Board issued a proposed FASB Concepts Statement, Conceptual Framework for Financial Reporting Chapter 8: Notes to Financial Statements, which the Board finalized on August 28, 2018. The Concepts Statement is intended to identify a broad range of possible information for the Board s consideration when deciding on the disclosure requirements for a particular topic. From that broad set, the Board will identify a narrower set of disclosures about that topic to be required on the basis of, among other considerations, an evaluation of whether the expected benefits of entities providing the information justify the expected costs.

6 The Concepts Statement will be used by the Board as part of the process for establishing disclosure requirements in future accounting standards as well as for evaluating existing disclosure requirements, if and when the Board considers those requirements. Before the Concepts Statement was finalized, the Board decided to test the concepts in the proposed Concepts Statement and improve the effectiveness of disclosure requirements on fair Value Measurement by using those concepts. The amendments in this Update are the result of the Board s final deliberations of the concepts in the Concepts Statement as they relate to fair Value Measurement disclosures.

7 Who Is Affected by the Amendments in This Update? The amendments in this Update apply to all entities that are required, under existing GAAP, to make disclosures about recurring or nonrecurring fair Value measurements. 1 Certain of the disclosures that are required by the amendments in this Update are not required for nonpublic entities. What Are the Main Provisions? The amendments in this Update modify the disclosure requirements on fair Value measurements in topic 820 , fair Value Measurement , based on the concepts in the Concepts Statement, including the consideration of costs and benefits. Removals The following disclosure requirements were removed from topic 820 : 1.

8 The amount of and reasons for transfers between Level 1 and Level 2 of the fair Value hierarchy 2. The policy for timing of transfers between levels 3. The valuation processes for Level 3 fair Value measurements 4. 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 : 1. 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.

9 2. 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. 3. 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: 1. 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 2 2.

10 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.