AICPA Issues Practice Aid on Fair Value

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January 13, 2010

The AICPA recently issued a non-authoritative Technical Practice Aid (TPA) intended to assist reporting entities in implementing the provisions of FASB Accounting Standards Codification (ASC) 820, "Fair Value Measurements and Disclosures." The TPAs (sections 2220.18-2220.27) apply to investments that are required or permitted to be measured or disclosed at fair value, are within the scope of paragraphs 4 and 5 of FASB ASC 820-10-15, and address the use of net asset value (NAV).

The TPA is actually a series of questions and answers that address a variety of fair value considerations and requirements in FASB ASC 820. Specifically, TPA sections 2220.18-.27 apply to investments that are required or permitted to be measured or disclosed at fair value and are within the scope of paragraphs 4 and 5 of FASB ASC 820-10-15.

Topics covered include:

Applicability of NAV as a practical expedient
The relationship between unit of account and an interest in an alternative investment
How FASB ASC 946, "Financial Services - Investment Companies," applies to NAV
Key factors to consider from fund managers related to valuation
The relationship between the reporting entity's measurement date and historical realizations
Determining whether an adjustment to NAV is necessary
How to adjust NAV
Disclosures
Fair value categorizations
Investment inputs and features
Due diligence and ongoing monitoring