The IASB is keeping measurement firmly at the top of the agenda with the issue of another Discussion Paper.
In December, the IASB published a DP ‘Fair Value Measurements’, as part of its programme of convergence with the US FASB.
The DP sets out the text of an American standard, SFAS 157, which was issued by the FASB in September 2006, and IASB’s preliminary views on certain of the issues that arise. The DP is intended to form a foundation for the development of an exposure draft which will lead to a standard prescribing an approach which will be widely applied in International Financial Reporting Standards (IFRS) that require or permit the use of fair values.
No decisions have been taken by the IASB at this stage as to whether or how the provisions of SFAS 157 should be modified for the context of IFRS and whether any standards that currently require fair values to be used should be modified or exempted from the scope of the standard. Nor does the DP propose any extension in the use of fair value for financial reporting purposes: its purpose is to codify, clarify and simplify existing guidance in IFRS.
In an extensive Invitation to Comment, a number of issues are highlighted including:
- the proposal that fair value be defined in terms of an exit price objective (that is a selling price, rather than an entry (buying) price);
- that fair values should, where possible, be determined from the perspective of market participants, rather than that of the entity;
- whether a transaction price should be deemed to represent fair value on initial recognition and, if not, how apparent gains and losses that might arise on initial recognition (’day one’ gains and losses) should be dealt with.
The ASB encourages UK and Irish constituents to comment directly to IASB. IASB has asked for comments on the Discussion Paper by 2 April 2007. The ASB intends to publish its comments in February. The ASB held a public meeting on measurement in April 2006 and details of that can be found on the ASB website at the following: www.frc.org.uk/asb/about/pub1097.html.
