Friday, October 17, 2008

FASB Issues Final SP 157-3 on Valuation in Inactive Markets

The Financial Accounting Standards Board (FASB) has issued the final verson of FASB Staff Postion 157-3 ("FSP 157-3").  The FASB issued this FSP in literally a matter of days to help financial-statement preparers deal with valuations involving financial assets in markets that are not active.

The final Staff Position deviates little from the proposed position, FSP 157-d, and states that significant judgment is required in valuing financial assets. For example, prices in disorderly markets cannot  automatically be rejected or accepted without sufficient evaluation. In addition, a distressed market does not result in distressed prices for all transactions, and judgment is required at the individual transaction level.

The FSP is effective upon issuance, including prior periods for which financial statements have not been issued (i.e., Q3 for calendar-year companies).

The full text of FSP 157-3 is available here: