Disclosures for FAS 157

By Linda Cavanaugh, CPA - Now that you have identified your assets and liabilities recorded at fair value and determined what level of the hierarchy that the inputs fall into, you need to tell your shareholders and other stakeholders. Three charts are needed for the disclosure:

1. Level of inputs for recurring items

These disclosures should be in a tabular form.

a.the fair value measurements at the reporting date
b.the hierarchy level of the inputs
c.the amount of total gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to those assets still held at the reporting date and a description of where those unrealized gains or losses are reported in the statement of income.

2. Breakdown of Level 3 inputs

These disclosures should be in tabular form.

a.total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings and a description of where those gains or losses included in earnings are reported in the statement of income
b.purchases, sales, issuances and settlements
c.transfers in and/or out of Level 3 (transfers due to changes in observability of significant inputs)

In annual periods only, the valuation techniques used to measure fair value and a discussion of changes in valuation techniques.

3. Level of inputs for non-recurring items

These disclosures should be in a tabular form.

a.the fair value measurements recorded during the period and the reasons for the measurements.
b.the hierarchy level of the inputs
c.for Level 3 inputs, a description of the inputs and the information used to develop the inputs

In annual periods only, the valuation techniques used to measure fair value and a discussion of changes in the valuation techniques used to measure similar asset in prior periods.

Figuring out which level the inputs go into is the most difficult part of FAS 157. I had trouble deciding whether a market was active enough to be a Level 1 or if a broker quote really represented fair value or if it was a Level 2 input. Please share with your fellow accountants any difficulties that you had determining the level of input.

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Linda is a CPA living in Southwestern Ohio, working as a research accountant for an investor-owned publicly traded utility company. She specializes in implementing new FASB and SEC requirements and FAS 133 derivative issues. In her role at the utility she has encountered many issues and written many memos, so send in your implementation and derivative issues and Linda will help figure out an answer.

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