Fair Value Measurements and Disclosures, ASC 820

–> FSP FAS 157-4, April 2009

Fair Value Measurements when the Markets are not Active

FASB Staff Position FAS 157-4, April 2009
“Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly”

SFAS 157, September 2006
“Fair Value Measurements”

Fair Value Hierarchy
Level 1: Quoted prices in active market
Level 2: Observable inputs other than Level 1 inputs
Level 3: Unobservable inputs

Level 2 inputs include:
1. Quoted prices of similar assets in active markets
2. Quoted prices in the markets that are not active

FSP FAS 157-4 addresses:
1. When the “volume and level” of activity decreased significantly
2. When the transactions are not orderly

 Quoted prices need a significant adjustment
–> if the “volume and level” of activity decreased significantly
–> in the markets that are not active: Level 2 inputs
–> FSP FAS 157-4 does not change Level 1 inputs

FSP FAS 157-4 provides additional guidance
–> when the transactions are not orderly

FSP FAS 157-4 superseded FSP FAS 157-3

 

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