#IASB & #FASB #accounting proposals on Level 3 fair value standards just issued
The IASB and FASB have just announced a joint proposal to address fair value standards. If the G20 Toronto summit was disappointing for those seeking traction on convergence generally and on fair value in particular, then here is the initiative to provide hope that this particular G20 agenda item is not quite dead.
Level three assets are those assets for which no ready trading market exists and for which valuation is most challenging. In their own words from the exposure draft: ‘The IASB and the FASB have tentatively decided to require entities to disclose a measurement uncertainty analysis for fair value measurements categorised within Level 3 of the fair value hierarchy unless another IFRS specifies that such a disclosure is not required for a particular asset or liability.”
Sharpen your pencils, and spend the summer considering the implications associated with this initiative from a risk management, IT systems, legal liability, and regulatory perspective. Remember that Level 3 assets are where banks current hold toxic debts from subprime to certain European sovereign bonds.
But don’t think about it too long….comments are due on 7 September 2010. For us G20 analysts, this is good news…it theoretically provides sufficient time for the accounting standard setters to provide a view on general direction at the November summit in the Republic of Korea.
