Alert: FASB Accounting Standards Update 2018-13 - Changes to the Disclosure Requirements for Fair Value Measurement

Category: US GAAP

Alert: FASB Accounting Standards Update 2018-13 - Changes to the Disclosure Requirements for Fair Value Measurement

On August 28, 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2018-13 Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The ASU aims to improve the disclosure requirements on fair value measurement by adding, removing, and modifying certain disclosures.

New Disclosure Requirements

The new disclosure requirements are not applicable to non-public entities. The ASU adds the following new disclosures:

  • For recurring Level 3 fair value measurements held at the end of the reporting period, the changes in unrealized gains and losses for the period included in other comprehensive income.
  • 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) instead 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.

Eliminated Disclosure Requirements

The ASU removes the following disclosures:

  • The amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy.
  • The policy for timing of transfers between levels of the fair value hierarchy.
  • The valuation processes for Level 3 fair value measurements.
  • For non-public entities only, the changes in unrealized gains/losses for the period included in earnings for recurring Level 3 fair value measurements held at the end of the reporting period.

Modified Disclosure Requirements

The ASU modifies the following disclosure requirements:

  • For non-public entities only, instead of a rollforward for Level 3 fair value measurements, disclosure relating to transfers into and out of Level 3 of the fair value hierarchy and purchases/issues of Level 3 assets and liabilities is required.
  • 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.
  • The amendments clarify that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date. For recurring fair value measurements categorized within Level 3 of the fair value hierarchy, a narrative description of the uncertainty of the fair value measurement from the use of significant unobservable inputs, if those inputs reasonably could have been different at the reporting date, is required.

The ASU is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. The entities can choose to early adopt any removed or modified disclosures upon issuance of the ASU and delay adoption of the additional disclosures until the effective date.

The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented in the fiscal year of adoption.

To access the full script of ASU No. 2018-13, click here

 

This communication contains a general overview of the topic and is current as of September 30, 2018. The application of the principles addressed will depend upon the particular facts and circumstances of each individual case. Accordingly, this publication is not a substitute for professional advice and we recommend that any decisions you take about the application or not of any of the information presented be made in consultation with a qualified professional, who can address any variance that may be required to reflect your circumstances. Please contact your local MNP representative for customized assistance with the application of this material. MNP LLP accepts no responsibility or liability for any loss related to any person's use of or reliance upon this material. © MNP LLP 2018. All rights reserved.

Contact us

Michelle Balmer

Michelle Balmer CPA, CA

Vice President, Assurance

Michelle Balmer, CPA, CA, is a Senior Assurance Services Partner with MNP. With 14 years of experience in public practice, Michelle helps a broad range of public and privately held companies in a variety of industries. She also works on special projects, including costing studies, benchmarking and best-practice studies, operational analyses, litigation support and due diligence.

As a key member of MNP's Assurance team, Michelle has played an instrumental role in assurance policy development, implementing accounting and assurance standards firm-wide and educating assurance practitioners regarding methodologies and new pronouncements. She also provides technical advice and consultation on accounting and assurance issues, as well as on rules of professional conduct issues, to all MNP practitioners.

Michelle was certified a Chartered Accountant (CA) after obtaining a Bachelor of Commerce degree from the University of Alberta. She has been actively involved with the Institute of Chartered Accountants of Alberta, including the Chartered Accountants School of Business, in an instructional and marketing capacity. An avid volunteer, she has assisted numerous groups such as the Easter Seals of Alberta, Paralympic Sports Association and Junior Achievement of Northern Alberta.