FASB Issues Staff Position on Fair Value Measurements

February 21, 2008

FASB Staff Position (FSP) 157-2, issued on February 12, delays the effective date of Statement No. 157, Fair Value Measurements, for nonfinancial assets and nonfinancial liabilities. Independent institutions would have until fiscal 2010 to meet the requirements of SFAS 157 for eligible nonfinancial assets and nonfinancial liabilities. FSP 157-2 does not apply to those nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually).

For purposes of applying the FSP, nonfinancial assets and nonfinancial liabilities would include all assets and liabilities other than those meeting the definition of a financial asset or financial liability as defined in paragraph 6 of FASB Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. The FSP defers the effective date of Statement 157 to fiscal years beginning after November 15, 2008--or fiscal 2010 for the vast majority of colleges and universities.

Per SFAS 159, a financial asset is defined as cash, evidence of an ownership interest in an entity, or a contract that conveys to one entity a right to:

receive cash or another financial instrument from a second entity, or
exchange other financial instruments on potentially favorable terms with the second entity.

A financial liability is defined as a contract that imposes on one entity an obligation to:

deliver cash or another financial instrument to a second entity, or
exchange other financial instruments on potentially unfavorable terms with the second entity.

Examples of items to which the deferral would apply include, but are not limited to:

Nonfinancial assets and nonfinancial liabilities initially measured at fair value in a business combination or other new basis event, but not measured at fair value in subsequent periods
Reporting units measured at fair value in the first step of a goodwill impairment test as described in paragraph 19 of FASB Statement No. 142
Nonfinancial assets and nonfinancial liabilities measured at fair value in the second step of a goodwill impairment test as described in paragraphs 20 and 21 of FASB Statement No. 142
Indefinite-lived intangible assets measured at fair value for impairment assessment under FASB Statement No. 142
Nonfinancial long-lived assets measured at fair value for an impairment assessment under FASB Statement No. 144
Asset retirement obligations initially measured at fair value under FASB Statement No. 143
Nonfinancial liabilities for exist or disposal activities initially measured at fair value under FASB Statement No. 146.

NACUBO Contact: Sue Menditto, Director, Accounting Policy