Project Update

Nonpublic Entity Fair Value Measurement Disclosures

Last updated on July 5, 2012.

(Updated sections are indicated with an asterisk *)

The staff has prepared this summary of Board decisions for information purposes only. Those Board decisions are tentative and do not change current accounting. Official positions of the FASB are determined only after extensive due process and deliberations.

Project Objective
*Due Process Documents
*Decisions Reached at the Last Meeting
*Summary of Decisions Reached to Date
*Next Steps
*Board/Other Public Meeting Dates
Background Information
Contact Information

Project Objective

The primary objective of the Nonpublic Entity Fair Value Measurement Disclosures project is to evaluate whether there is a basis to exempt nonpublic entities from providing some disclosures about fair value measurements determined under the Level 3 fair value hierarchy, considering the relevance, costs, and benefits of those disclosures for nonpublic entities.

*Due Process Documents

  • Read the news release for additional information about the agenda project.

*Decisions Reached at the Last Meeting (June 29, 2012)

The FASB Chairman announced that this project has been removed from the Board’s current technical agenda during a public meeting of the Private Company Financial Reporting Committee (PCFRC) on June 29, 2012. In consultation with other Board members, the Chairman decided to drop the project based on input received from various stakeholders, including the PCFRC and the FASB’s Small Business Advisory Committee indicating that the benefits of the proposal to modify certain disclosure requirements for private companies would be very limited, compared with the benefits that the Board originally expected. Additionally, many stakeholders suggested that the Board first consider the accounting for certain fair value measurements for private companies before addressing fair value disclosures; however, that approach would be beyond the limited scope of this disclosure project. The FASB Chairman also announced the Board’s intent to share the work performed during this project, including the input obtained from private company stakeholders, with the Private Company Council, once it is seated, to inform the Private Company Council about private company considerations related to Level 3 fair value measurement accounting and disclosure requirements.

Prior to removing the project from its technical agenda, the Board had discussed whether a narrative disclosure of the reasons for significant changes in the amount of assets and liabilities measured under Level 3 of the fair value hierarchy would be a cost-effective alternative to the existing requirement to disclose tabular reconciliations from the opening balances to the closing balances for (1) derivative assets and liabilities, (2) pension and postretirement plan assets, and (3) all other assets and liabilities measured under Level 3 of the fair value hierarchy on a recurring basis. The Board directed the staff to perform targeted outreach with preparers, CPA practitioners, and users of nonpublic entity financial statements to gather information about whether that alternative would be cost-effective, and to report its findings at a future Board meeting.

The Board had decided that the scope of the project should exclude nonpublic entities for which substantially all assets are measured at fair value on a recurring basis.

The Board had also decided that the scope of the project should exclude not-for-profit entities; however, the Board directed the staff to solicit input from stakeholders about that exclusion.

*Summary of Decisions Reached to Date

Please refer to Decisions Reached at the Last Meeting.

*Next Steps

The Board directed the staff to provide the Private Company Council, once it is seated, with the results of its work performed, including the input obtained from private company stakeholders, to inform the Private Company Council about private company considerations related to Level 3 fair value measurement accounting and disclosure requirements.

*Board/Other Public Meeting Dates

The Board meeting minutes are provided for the information and convenience of constituents who want to follow the Board’s deliberations. All of the conclusions reported are tentative and may be changed at future Board meetings. Decisions become final only after a formal written ballot to issue a final standard.

*June 29, 2012 Public Meeting of the Private Company Financial Reporting Committee (Agenda decision)—Decision to remove the project from the Board’s current technical agenda on the basis of input from financial statement users, preparers, and CPA practitioners about the expected benefits of the proposal under consideration.
April 25, 2012 Board Meeting—Discussion about the cost-effectiveness of permitting an alternative to the current requirement to provide tabular reconciliations from the opening balances to the closing balances for (1) derivative assets and liabilities, (2) pension and postretirement plan assets, and (3) all other assets and liabilities measured under Level 3 of the fair value hierarchy on a recurring basis. Also, tentative decisions were made about which types of nonpublic entities would be excluded from the scope of the project.
November 22, 2011 Board Meeting (Agenda decision)—Decision about addition of a technical project to be added to the Board’s agenda to evaluate whether there is a basis to exempt nonpublic entities from providing some disclosures about fair value measurements determined under the Level 3 fair value hierarchy, considering the relevance, costs, and benefits of those disclosures for nonpublic entities.

Background Information

In October 2011, the FASB conducted two general roundtable sessions during which private company constituents shared their concerns and provided some recommendations to FASB members. One of the most significant concerns raised by roundtable participants related to the nature and extent of required disclosures about fair value measurements determined under Level 3 fair value hierarchy.

Before and after the roundtables, many private company constituents, including members of FASB advisory groups, communicated that in their view, some fair value disclosure requirements are irrelevant to the decision making of most of their financial statement users, excessive, and costly. Many private company constituents state that additional fair value measurement disclosure exemptions should be permitted for nonpublic entities, in particular, the requirements to disclose (1) a reconciliation of the opening and closing balances for recurring fair value measurements categorized within the Level 3 fair value hierarchy and (2) quantitative information about the significant unobservable inputs used in determining Level 3 fair value measurements.

Based on nonpublic entity stakeholder input, on November 22, 2011, the FASB chairman added a project to the FASB agenda to evaluate the need to reduce existing disclosure requirements for nonpublic entities about fair value measurements falling within Level 3 of the fair value hierarchy. Level 3 of the fair value hierarchy refers to fair value measurements determined using significant unobservable inputs.

Contact Information

Kevin P. Catalano
Practice Fellow
kpcatalano@fasb.org

Ben Couch
Practice Fellow
bcouch@fasb.org

Heather Bergman
Postgraduate Technical Assistant
habergman@fasb.org