The article outlines the concern of users of financial statements and regulatory bodies regarding the current disclosure of assets and liabilities using Fair value measurement. The FASB has proposed changes in the fair value accounting mainly focus on level 3 assets and liabilities which are measured through assumed variables and inputs rather than relying on actual data. Companies tend to use favorable inputs when valuing such assets and liabilities which cause these values to be exaggerated.
The proposed amendments in the fair value accounting standard would require companies to use a range of measurement inputs and disclose the impact of changing these inputs on value of assets and financial statements. The amendments in the standard would also require companies to disclose transfers of assets and liabilities to and from levels 1 and 2. The amendments would also require companies to disclose gross amounts of purchases, sales and issue of level three assets rather than a net amount of changes as being practiced currently. The amendments if implemented would be effective after December 15, 2009 (Katz 2009).
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