Disclosure Requirements Flashcards
What needs to be disclosured?
FV of assets, liabilities, valuation techniques and input, judgements and assumptions, changes in FV in cash flows and operations
Disclosures in a recurring basis
Ans:
1) For each class of assets and liabilities, the fair value measurements either on the balance sheet or in the footnotes at the reporting date
2) Segregated into each of the three levels within the fair value hierarchy.
3) For measurements classified in levels 2 and 3, a description of the valuation techniques and inputs used to measure fair value and a discussion of changes in valuation techniques during the period.
4) For fair value measurements in level 3, the entity must disclose the unobservable inputs, a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable.`
5) For fair value measurements in level 3
6) The amount of total gains or losses in the period that are attributable to the change in unrealized gains or losses relating to assets and liabilities that are reported in the income statement or statement of OCI.
7) For nonfinancial assets, disclosure if highest and best use differs from current use and why
Recurring basis for FV measurements in level 3 (unobservable inputs)
1) total gains or losses recognized, showing separately those included in earnings and those included in other compre
2) Purchases, sales, issuances, and settlements, disclosed separately
3) Transfer in and/or out of level 3 disclosed separately, the reasons for such transfers.
Disclosures in a non recurring basis
An asset or liability is measured at FV on non recurring basis because that asset or liability is impaired or there is other evidence that fair value measurement must be used.
Disclosures for items reported at FV on a nonrecurring must met the following:
1) The reasons for the measurement and if the measurement estimate is at a date that is not at the end of the reporting period, the entity must disclose the date for the measurement
2) For FV measurements in level 3, unobservable inputs, a description of the valuation process used and quantitative information about the unobservable inputs used.
Disclosure issues
The quantitative disclosures required above must be presented using a tabular format.
Reporting entities are encouraged but not required to combine the fair value information disclosures under this ASC with fair value information disclosures required by other accounting pronouncements
If NAV is used as a practical expedient to determine FV, NAV is not reported within the fair value hierarchy but rather is separately disclosed in the footnote of financial statements.
NAV disclosures
NAV are not categorized in the fair value hierarchy ( level 1,2, or 3) but are separately reported in the footnotes with disclosures that indicate that NAV is being used and these disclosures must reconcile to the amounts reported on the BS.
When using NAV for measuring FV, disclosures must include information about the terms and conditions in which the company can redeem its investments.
Disclosures related to the fair value options
1) Fair Value option disclosures objectives - when the fair value option is elected, the disclosures should be sufficient to enable users of financial statements to understand management’s reasons for electing or partially electing the fair value option.
2) Required disclosures for interim and annual statements of financial position. As of each date for which a statement of financial position ( balance sheet) is presented , the following must be disclosed
What are the six disclosure requirements in a balance sheet for interim and annual statements
1) Management’s reasons for electing a fair value option for each eligible item or group similar items
2) If the fair value option is elected for some, but not all, eligible items within a group of eligible items:
3) For each line item in the statement financial position that includes an item or items for which the fair value option has been elected
4) The difference between the aggregate fair value and the aggregate unpaid principal balance
5) For loans held as assets for which FV option has been elected
6) For investments that would have been accounted for under the equity method if the entity had not chosen to apply the fair value option, the information required by ASC 323, the Equity Method of Accounting for Investments
What are the four disclosures for interim and annual income statements
1) For each line item in the statement of financial position ( Balance Sheet), the amount of gains and losses from FV changes included in earnings for the period and in which line in the income statement those gains/losses are reported.
2) A description of how interest and dividends are measured and where they are reported in the income statement.
3) For loans and other receivables held as assets
4) For liabilities with FV that have been significantly affected during the reporting period by changes in the instrument-specific credit risk
Disclosure requirements - other
1) In annual reports only, the methods and significant assumptions used to estimate FV [of items for which the FV option has been elected] must be disclosed.
2) If an entity elects the FV option at the time of an investment, it is subjected to the equity method of accounting or when it ceases to consolidate a subsidiary, it must disclose.
