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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
• Disclosures
• Fair value categorizations
• Investment inputs and features
• Due diligence and ongoing monitoring

The TPAs can be accessed at the AICPA website.

Contact

Sue Menditto
Director, Accounting Policy
202.861.2542
E-mail