but not suspended and also makes eight recommendations to improve their application, including:
  • Development of additional guidance and other tools for determining fair value when relevant market information is not available in illiquid or inactive markets, including consideration of the need for guidance to assist companies and auditors in addressing:
ΦHow to determine when markets become inactive and whether a transaction or group of transactions are forced or distressed
ΦHow the impact of a change in credit risk on the value of an asset or liability should be estimated
ΦWhen should observable market information be supplemented with and/or reliance placed on unobservable information in the form of management estimates
ΦHow to confirm that assumptions utilized are those that would be used by market participants and not just a specific entity
  • Enhancement of existing disclosure and presentation requirements related to the effect of fair value in the financial statements.
  • Educational efforts, including those to reinforce the need for management judgment in the determination of fair value estimates.
  • FASB examination on the impact of liquidity in the measurement of fair value.
  • FASB assessment of whether the incorporation of credit risk in the measurement of liabilities provides useful information to investors.

In addition, the report also recommends that FASB reassess current impairment accounting models for financial instruments, including consideration of narrowing the number of models under U.S. GAAP.

http://www.sec.gov/news/press/2008/2008-307.htm
30 December 2008
 

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