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Business and Policy Areas
Business and Policy Areas

FASB Rejects Deferral of Statement 157 for Financial Assets and Liabilities

November 15, 2007

During its November 15 Board meeting, the Financial Accounting Standards Board (FASB) reaffirmed its vote against a blanket deferral of Statement 157, Fair Value Measurements. The Board did, however, provide a one year deferral for the implementation of Statement 157 for other nonfinancial assets and liabilities. A FASB Staff Position (FSP) will be issued for comment in the near future on this partial deferral.

It is not uncommon for the endowments of independent institutions to contain significant nonfinancial assets, such as real estate, oil and gas, intangibles, and so on. At this time, it is not clear if the FSP will include nonfinancial assets that are part of an endowment.   

FASB Statement No.157,  Fair Value Measurements (SFAS 157), issued in September 2006, defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. Because of the FASB’s ever-increasing use of fair value, many had expressed concerns about the ability to measure fair value reliably, especially for assets and liabilities that do not have quoted market values. This standard is the FASB’s response to those concerns. SFAS 157 does not require any new fair value measurements.  Instead, it provides standards to be applied under other accounting pronouncements that require or permit fair value measurements. 

SFAS 157 emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions—referred to as "inputs"—that market participants would use in pricing the asset or liability. The standard establishes a fair value hierarchy that distinguishes between market participant assumptions and the reporting entity’s own assumptions about market participant assumptions. 


NACUBO Contact: Sue Menditto, director accounting policy