FASB Votes To Issue Final Standard On Fair Value, OTTI, Disclosures
board meeting earlier today, FASB voted to issue three final FASB Staff Positions (FSPs) on fair value in inactive markets, other-than-temporary-impairment (OTTI), and a separate FSP to make certain annual disclosures of fair value quarterly. Some changes from the proposed versions of the FSPs, listed below, will be made based on comment letters received. The three FSPs were released in proposed form as:
- Proposed FSP FAS 157-e, Determining Whether a Market Is Not Active and a Transaction Is Not Distressed, (the ‘157 FSP’)
- Proposed FSP FAS 115-a, FAS 124-a and EITF 99-20-b, Recognition and Presentation of Other-Than-Temporary Impairments, (the ‘OTTI FSP’)
- Proposed FSP FAS 107-b and APB 28-a, Interim Disclosures about Fair Value of Financial Instruments (the ‘107 FSP’)
The effective date for all three standards (the upcoming final versions following from the three proposed FSPs listed above) is for periods ending after June 15, 2009.
Early application of the standards for periods ending after March 15, 2009 is permitted, but only as follows:
- If you early adopt the 107 FSP , you must also early adopt the 157 FSP and the OTTI FSP
- If you early adopt the 157 FSP, you must also early adopt the OTTI FSP, and vice versa, (i.e. if you want to early adopt one of that pair, you have to early adopt both), however, you do not have to early adopt the 107 FSP in order to adopt the others.
- Retrospective application will not be permitted.
FASB Technical Director Russell Golden said he planned to ask staff to do a post-implementation review looking at some early adopters, and that review would begin in early May. He indicated information from that review would enable the staff “to bring to you any improvements necessary” before the mandatory adoption date.
The board agreed to make certain changes in the final FSPs, based on comments received on the proposed FSPs. Over 300 comments were received on the FSPs relating to 157 and OTTI.
At a press conference following the meeting, FAF President and COO Theresa Polley noted that the FAF met by conference call on March 16 and agreed that FASB, while following an accelerated due process for the 157 FSP and OTTI FSP, were in accordance with the minimum comment period established by FAF for FASB comment periods.
In response to questions from reporters as to whether, as asserted by some investor groups like the CFA Institute, FASB had compromised its independence and due process under political pressure, FASB Chairman Robert Herz noted the FASB had reached out to over 40 institutional investors, ratings agencies, and other investors, and found that while some agreed with CFA Institutes' views on the proposed standards, the majority did not.
Additional information on decisions reached at today's FASB meeting can be found here.