Disclosure Requirements - Fair Value Framework

Question 1

What does Fair Value on a recurring basis mean?

Answer 1

Fair Value is determined and then applied to an item period after period

Question 2

What does Fair Value on a nonrecurring basis mean?

Answer 2

Fair Value is determined and applied only when certain conditions or situations occur

Question 3

What disclosures are required when using the Recurring Basis of Fair Value for each interim and annual period for each major category of asset and liability?

Answer 3

-Fair Value measurement at reporting date
-Level of the Fair value hierarchy within each measurement falls
-Transfers into and out of each level of the hierarchy. Each must be shown and discussed separately
-For measurements in Level 3 a reconciliation of beginning and ending balances, showing:
Recognized gains and losses and whether reported in
net income or other comprehensive income
Purchases, sales, issuances and settlements
Transfers in/out of level 3
-Fair Value measurements that fall in Level 3:
Description of the valuation process used
Quantitative information about the unobservable inputs
Narrative descriptions of sensitivity to changes in
Unobservable inputs
Amount of gains/losses for period due to change in unrealized gains/losses for items still held at measurement date
-For Levels 2 and 3 a description of any changes in techniques

Question 4

What disclosures are required when using the Nonrecurring Basis of Fair Value for each interim and and annual period for each major category of asset and liability?

Answer 4

-Reasons for the fair value measurement
-Level of the Fair Value hierarchy within which measurements fall
-For measurements in Levels 2 and 3, a description of any changes in techniques
-For measurements that fall in Level 3:
The effect of the measurement on earnings or OCI
Quantitative information about the unobservable inputs used
-If “highest and best” use of nonfinancial assets differs from current use, disclose that fact and why

Question 5

Disclosures needed for Fair Value Option?

Answer 5

• Identify items to which the FV option is applied and reasons for electing the FV Option
• Information to enable users to understand how FV is applied for each item (methods and assumptions)
• The amount of gains and losses associated with the FV changes

Question 6

What significant FV disclosures are required only in annual statements?

Answer 6

The methods and significant assumptions used to estimated FV

Question 7

Distinguish between assets and liabilities measured at FV on a recurring basis and nonrecurring basis

Answer 7

Assets and Liabilities measured at FV on recurring basis are adjusted to FV period after period. Assets and Liabilities measured at FV on a nonrecurring basis are adjusted to FV only at the time of a particular event.

Question 8

What types of comparisons are FV option disclosures intended to facilitate?

Answer 8

1. ) Between entities that choose different measurement methods for similar assets and liabilities
2. ) Between assets and liabilities in the Financial Statements of an entity that selects different measurement for similar assets and liabilities