Alert September 08, 2009

FASB Proposes Updates to Fair Value Disclosures

The Financial Accounting Standards Board (“FASB”) proposed an accounting standards update that would amend U.S. generally accepted accounting principles (GAAP) disclosure requirements related to the Fair Value Measurements and Disclosures‑Overall Subtopic (Subtopic 820-10) of the FASB Accounting Standards Codification, originally issued as FASB Statement No. 157, Fair Value Measurements.  The update would require new disclosure regarding (a) the effect of reasonably possible alternative inputs on a Level 3 fair value measurement if they would change the measurement significantly (sensitivity disclosures) and (b) significant transfers into and/or out of Levels 1 and 2 and the reasons for the transfers.  In addition, under the update, for Level 3 fair value measurements, information about changes due to purchases, sales, issuances and settlements would be presented separately rather than on a gross basis.  The proposed update would also revise Subtopic 820-10 to clarify (1) the requirements for an issuer’s determinations regarding the appropriate classes of assets and liabilities as to which it will make required disclosures concerning its fair value measurements and (2) the disclosures required concerning  the valuation techniques and inputs for fair value measurements that fall in Level 2 or Level 3. The update proposes that the amendments become effective for interim and annual reporting periods ending after December 15, 2009, except for sensitivity disclosures, which would be required for interim and annual reporting periods ending after March 15, 2010.  Comments on the update are due to FASB by October 12, 2009.