FASB Initiates Projects to Improve Measurement and Disclosure of Fair Value Estimates

Norwalk, CT, February 18, 2009—Robert H. Herz, Chairman of the Financial Accounting Standards Board (FASB), today announced the addition of new FASB agenda projects intended to improve (1) the application guidance used to determine fair values and (2) disclosure of fair value estimates. The projects were added in response to recommendations contained in the Securities and Exchange Commission’s (SEC) recent study on mark-to-market accounting, as well as input provided by the FASB’s Valuation Resource Group, a group of valuation and accounting professionals who provide the FASB staff and Board with information on implementation issues surrounding fair value measurements used for financial statement reporting purposes.

“The SEC expressed continued support of fair value accounting in its study, but recommended consideration of potential improvements in the guidance surrounding the application of fair value principles,” stated Chairman Herz. “We agree with the SEC and with our Valuation Resource Group that more application guidance to determine fair values is needed in current market conditions. Additionally, investors have asked for more information and disclosure about fair value estimates. Therefore, the FASB is immediately embarking on projects that directly address areas that constituents have told us are challenging in the current environment, and which will improve disclosures in financial reports.”

The fair value projects address both application and disclosure guidance:

  • The projects on application guidance will address determining when a market for an asset or a liability is active or inactive; determining when a transaction is distressed; and applying fair value to interests in alternative investments, such as hedge funds and private equity funds.


  • The project on improving disclosures about fair value measurements will consider requiring additional disclosures on such matters as sensitivities of measurements to key inputs and transfers of items between the fair value measurement levels.


The FASB anticipates completing projects on application guidance by the end of the second quarter of 2009, and the project on improving disclosures in time for year-end financial reporting. The FASB has also recently proposed enhanced disclosures in interim reports relating to the fair values of financial instruments. (Proposed FASB Staff Position (FSP) FAS 107-b and APB 28-a is available at

As previously announced, the FASB has also commenced work with the International Accounting Standards Board (IASB) on a more comprehensive project to improve, simplify, and converge the accounting for financial instruments. The Boards are obtaining input on that project from a number of sources, including the senior-level Financial Crisis Advisory Group that has been formed to assist the FASB and the IASB in evaluating financial reporting issues emanating from the global financial crisis.

The SEC study, entitled Report and Recommendations Pursuant to Section 133 of the Emergency Economic Stabilization Act of 2008: Study on Mark-To-Market Accounting, was issued to Congress by the SEC’s Office of the Chief Accountant and Division of Corporate Finance on December 30, 2008, as mandated by the Emergency Economic Stabilization Act of 2008. The 211-page report recommended against suspension of fair value accounting standards, and instead recommended specific improvements to existing practice. The report reaffirms that investors generally believe fair value accounting increases financial reporting transparency, and that the information it provides helps result in better investment decision-making. (The report is available at

The FASB Valuation Resource Group met on February 5, 2009 to provide input on fair value issues to the Board. The group was formed in June 2007, as a result of feedback received from constituents calling for the Board to address issues relating to valuation for financial reporting. More information about the VRG and its members is available at

About the Financial Accounting Standards Board

Since 1973, the Financial Accounting Standards Board has been the designated organization in the private sector for establishing standards of financial accounting and reporting. Those standards govern the preparation of financial reports and are officially recognized as authoritative by the Securities and Exchange Commission and the American Institute of Certified Public Accountants. Such standards are essential to the efficient functioning of the economy because investors, creditors, auditors, and others rely on credible, transparent, and comparable financial information. For more information about the FASB, visit our website at