01 November 2008

IASB guidance on application of fair value measurement when markets become inactive

The guidance takes the form of a summary document prepared by IASB staff and the final report of the expert advisory panel established to consider the issue.

The summary document sets out the context of the expert advisory panel report and highlights important issues associated with measuring the fair value of financial instruments when markets become inactive. It takes into consideration and is consistent with recent documents issued by the FASB on 10 October and by the Office of the Chief Accountant of the SEC and FASB staff on 30 September.

The report of the expert advisory panel is a summary of the seven meetings of experts who are users, preparers and auditors of financial statements, as well as regulators and others. In the report, the panel identifies practices that experts use for measuring the fair value of financial instruments when markets become inactive practices for fair value disclosures in such situations. The report provides useful information and educational guidance about the processes used and judgements made when measuring and disclosing fair value.

The IASB has also used the work of the panel to address the issues of disclosure, an area identified by the FSF along with fair value measurement and off balance sheet accounting. The feedback from the panel was incorporated in the preparation of the exposure draft proposing improvements to IFRS 7 Financial Instruments: Disclosures published on 15 October and will be used in the development of the forthcoming standard on fair value measurement. The IASB expects to publish an exposure draft of that standard in 2009.

Press release

Final report of the expert advisory panel

IASB staff summary

Further information on IASB decisions with regard to the credit crisis

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