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Fair Value Accounting

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|Fair value accounting broadened with FAS-159: more relevance, less consistency expected with new standard.(ACCOUNTING) |
|Source: [pic]Commercial Lending Review |
|Publication Date: 01-JUL-07 |
|The Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 159, The Fair Value Option for |
|Financial Assets and Financial Liabilities (FAS-159), in February 2007. This standard creates a fair value option for companies, including |
|not-for-profit organizations, on certain financial assets and financial liabilities. Companies are now able to irrevocably elect fair value |
|as the initial and subsequent measurement attribute for certain financial assets and financial liabilities on a contract-by-contract basis. |
|The new standard amends FAS-115, Accounting for Certain Investments in Debt and Equity Securities, for investments classified as available |
|for sale and held to maturity. FAS-159 allows changes in the fair value of certain financial assets and financial liabilities to be |
|recognized on the income statement as unrealized gains and losses in the year they occur. In addition, assets and liabilities meeting the |
|criteria set forth in FAS-159 will be reported on the statement of financial position at fair value. |
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|The option to use fair value for certain assets and liabilities will provide more relevant information to the users of...