AICPA Issues Practice Aid on Fair Value
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
- Fair value categorizations
- Investment inputs and features
- Due diligence and ongoing monitoring
The TPAs can be accessed at the AICPA website.
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