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FASB Initiates Fair Value Measurement and Disclosure Project

February 26, 2009

Last week the Financial Accounting Standards Board (FASB) announced the addition of new projects that will address the application of fair value guidance and disclosure of fair value estimates. Of particular interest to higher education is the inclusion of alternative investments in the scope of the projects.

The projects were added in response to recommendations contained in the Securities and Exchange Commission’s (SEC) recent study on mark-to-market accounting, as well as input provided by the FASB’s Valuation Resource Group. Current market conditions have led both the SEC and Valuation Resource Group to ask for more application guidance. The Valuation Resource Group is a group of valuation and accounting professionals who provide the FASB staff and Board with information on implementation issues surrounding fair value measurements used for financial statement reporting purposes.

Because so many institutions have alternative investments in their endowment investment pool, NACUBO’s Accounting Principles Council (APC) has made the case to FASB that more authoritative guidance is needed. In an unrelated announcement late last week, the AICPA began assembling a task force to address fair value implementation guidance focused on not-for-profit organizations. The APC will participate in this project.

NACUBO is closely following the work of both the FASB and AICPA on alternative investments. NACUBO will outline the issues and provide the latest guidance during a March 18th webcast on this topic. The program will use audience polling questions and facilitated discussion to help inform higher education industry comments and provide input to appropriate project committees.

Staff Resource: Sue Menditto, Director of Accounting Policy