The ED proposes to change the sensitivity disclosure of assets and liabilities measured at fair value within level 3 of the fair value hierarchy with two main tasks -to focus on unobservable inputs and to consider the effect of correlation between inputs where relevant and significant.
EFRAG has issued its draft comment letter on the IASB's ED Measurement Uncertainty Analysis Disclosure for Fair Value Measurements.. The IASB issued a limited re-exposure of the fair value disclosure proposals entitled Measurement Uncertainty Analysis Disclosure for Fair Value Measurements (‘the ED’) on 29 June 2010.
The ED proposes to change the sensitivity disclosure of assets and liabilities measured at fair value within level 3 of the fair value hierarchy to:
(a) Focus on unobservable inputs; and
(b) Consider the effect of correlation between inputs where relevant and significant.
EFRAG supports the proposed changes to the measurement uncertainty analysis disclosure. Specifically, EFRAG:
· welcomes the clarification that the analysis is focused on unobservable inputs and by implication provides information about measurement uncertainty, as opposed to market risk;
· supports the rationale for changing the wording ’reasonably possible alternative assumptions’ and the convergence objective it achieves; and
· agrees that correlation is an important factor in providing a meaningful analysis of measurement uncertainty where that correlation is relevant and significant.
Comments on the letter are invited by 27 August 2010
© EFRAG - European Financial Reporting Advisory Group
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