FEI update on fair value and financial instruments.

• Author: Graziano, Cheryl de Mesa
• Position: Financial reporting - Financial Executives International - Legislation

As many of the global stakeholders know, the Financial Accounting Standards Board and International Accounting Standards Board have been collaborating on convergence of accounting standards. In June the boards announced a modification to their June 2011 timeline--namely for projects we believe are a relatively lower priority or for which further research and analysis is necessary.

The boards also noted that release of the major draft proposals would occur on a staggered basis and that no more than four major exposure drafts would be out for comment in any given quarter.

A quarter has passed since the announcement, marking the end of the first wave of proposed changes--a banner, busy and some may contend historic period for financial reporting. During this time, FEI's Committees on Corporate Reporting (CCR), Private Company Standards (CPC-S) and Corporate Treasury (CCT) filed comment letters on loss contingencies, fair value measurements and pension plans.

Comment periods for the first group of exposure drafts ended in September or will close this month. A snapshot of where a few of them are now follows.

* Fair Value Measurements was due Sept. 7, The ED identified five notable changes: Highest and best use and valuation premise, measuring the fair value of an instrument classified in shareholders' equity, measuring the fair value of financial instruments that are managed within a portfolio and application of blockage factors and other premiums and discounts in a fair value measurement and additional disclosures.

After the comment period closed, 87 letters had been filed including from FEI member companies such as Bank of America, Citigroup, Credit Suisse, JPMorgan Chase and Wells Fargo.

FEI's CCR, which represents 45 large publicly held corporations, filed a letter. It strongly disagreed with the proposed additional fair value disclosures, particularly requirements to disclose effects from changing unobservable inputs; when use of an asset differs from the highest and best use when that asset is at fair value on the balance sheet; and categorization by fair value hierarchy level for items that are not measured at fair value but for which fair values are disclosed elsewhere.

* Financial Instruments was due on Sept. 30. Under this proposal, most financial instruments would be measured at fair value on the balance sheet. For some financial instruments, this represents no change. However, for certain other instruments, amortized cost information...