IASB proposes improvements to fair value measurements

15 October 2008

The IASB consults on an exposure draft on amendments to IFRS 7 to enhance disclosures about valuations, methodologies and the uncertainty associated with fair value measurements. The amendments would affect the fair value and liquidity risk disclosures.

The IASB consults on an exposure draft on amendments to IFRS 7 to enhance disclosures about valuations, methodologies and the uncertainty associated with fair value measurements. The amendments also clarify and enhance existing disclosure requirements about the nature and extent of liquidity risk.

 

Fair Value disclosures:

The exposure draft proposes amendments to disclosure requirements that are based on a three-level fair value hierarchy (similar to that used in SFAS 157).

 

The amendments would apply to financial instruments and require disclosures about:

• the level of the fair value hierarchy into which fair value measurements are categorised in their entirety. This requirement would apply both for fair values included in the statement of financial position and for other fair values that are disclosed but not included in that statement.
• the fair value measurements resulting from the use of significant unobservable inputs to valuation techniques. For these measurements, the disclosures include a reconciliation from the beginning balances to the ending balances.
• the movements between different levels of the fair value hierarchy, and the reasons for those movements.

 

 

Liquidity risk disclosures:

This exposure draft proposes amendments to IFRS 7 that would:

• clarify that liquidity risk disclosures are required only for financial liabilities that will result in the outflow of cash or another financial asset.
• require entities to provide quantitative disclosures based on how they manage liquidity risk for derivative financial liabilities.
• require entities to disclose the remaining expected maturities of non-derivative financial liabilities if they manage liquidity risk on the basis of expected maturities.
• strengthen the relationship between qualitative and quantitative disclosures about liquidity risk.

 

The IASB proposes an effective date of 1 July 2009.

Deadline for comments is 15 December 2008.

 

Press release

Exposure Draft

Project

 

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