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Alice Rosamund Cole
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1 1. Welcome Welcome to the International Accounting Standards Board s (IASB) and Financial Accounting Standards Board s (FASB) questionnaire on a proposed disclosure about the measurement uncertainty that is inherent in Level 3 fair value measurements. If you would like to preview the questionnaire before responding, copy and paste the URL below into another browser. This questionnaire has been designed for analysts and other financial statement users to give feedback to the IASB and the FASB on the usefulness of the proposed disclosure. The IASB and the FASB value feedback from their constituents; however, this questionnaire has been designed to solicit feedback from analysts and other financial statement users. If you are not an analyst or other financial statement user, but would like to give feedback on the proposal, please submit a comment letter using the URL below. Page 1

2 2. Background In June 2010 the IASB and the FASB each published a proposal that a company must disclose in the notes to its financial statements information about the measurement uncertainty inherent in those fair value measurements with the greatest level of subjectivity (Level 3 fair value measurements that are determined using models with unobservable data). The boards would like to get your feedback on their proposals. The following links may be useful in responding to this questionnaire. Copy and paste the URL's below into another browser window. The IASB s exposure draft 'Measurement Uncertainty Analysis Disclosure for Fair Value Measurements' The FASB s exposure draft of a proposed Accounting Standards Update 'Amendments for Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs' blobcol=urldata&blobtable=mungoblobs&blobkey=id&blobwhere= &blobheader=application%2fpdf Page 2

3 3. Proposal overview CURRENT REQUIREMENTS Companies applying IFRSs are currently required to disclose in the notes to their financial statements information about the sensitivities of fair value measurements to the main valuation assumptions for financial instruments measured at fair value. (This disclosure is not currently required for companies applying US GAAP.) This disclosure is intended to provide information about the potential measurement uncertainty inherent in those fair value measurements with the greatest level of subjectivity (Level 3 fair value measurements that are determined using models with unobservable data). PROPOSAL The IASB and the FASB are proposing that companies must disclose information about the sensitivities of fair value measurements to the main valuation assumptions for all Level 3 fair value measurements (not just for financial instruments). The boards proposals refer to this disclosure as a measurement uncertainty analysis. The measurement uncertainty analysis for financial instruments that is currently being disclosed by companies applying IFRSs reflects the effect on the fair value of changing each main assumption in isolation. It does not reflect the relationship that may exist between assumptions (for example, the relationship between revenue growth and cost growth when measuring the fair value of an equity investment using a discounted cash flow model, and how changing revenue growth might affect the cost growth assumption). The IASB and the FASB proposal would require that companies take into account the relationship between assumptions if there is one. The IASB and the FASB have prepared the following example of what a quantitative disclosure migh look like in the notes. To view the example, copy and paste the URL below into another browser window. Page 3

4 4. Questions 1. Do you think that companies should be required to disclose information about the measurement uncertainty inherent in their Level 3 fair value measurements? Yes, for ALL assets and liabilities measured at fair value in Level 3 (skip to question 3) Yes, for SOME assets and liabilities measured at fair value in Level 3 (see next question) No (skip to question 7) If no, please explain why 2. How useful is a measurement uncertainty analysis for the following assets and liabilities? Financial assets, financial liabilities and derivatives Physical assets (eg investment and other properties, machinery and equipment) Other assets (eg biological assets and agricultural produce) Non-financial liabilities (eg asset retirement obligations) Not useful Slightly useful Useful Very useful Critical Other (please describe) Explanation Page 4

5 . Conditional questions 3. Do you use the information about the measurement uncertainty inherent in Level 3 fair value measurements provided by companies today for financial instruments? Yes No Explanation (optional) 4. How do you use the measurement uncertainty information provided by companies today? As a worst case scenario (for example, by using the lower limit of the fair value in your analysis) As a best case scenario (for example, by using the upper limit of the fair value in your analysis) Other (please describe) Explanation. Do you think that companies should take into account relationships between assumptions when preparing a measurement uncertainty analysis disclosure? Yes No Explanation (optional). The measurement uncertainty analysis would be aggregated by class of asset or liability (for example, loans, residential mortgage-backed securities or collateralised debt obligations). Would a measurement uncertainty analysis disclosure by class provide a sufficient level of detail for your analysis? Yes No (please explain the level of aggregation or disaggregation that would be necessary for understanding the measurement uncertainty analysis) Explanation Page

6 . Questions continued 7. Is there a different or additional disclosure that you think would provide information about the measurement uncertainty inherent in Level 3 fair value measurements, and that the IASB and the FASB should consider instead of what is being proposed? Yes (please describe) No Explanation 8. Do you have any other comments not expressed in the questionnaire? Page

7 7. Respondent Details 9. Please tell us about yourself. This information is for IASB and FASB internal use only. We will use your personal information to report our findings from the survey on an anonymous basis. We will not publicly distribute or share individual responses received without your permission. We recognise that the views expressed are your personal views and not that of your organisation. Your contact details will not be distributed to third parties. We may contact you if we require clarification or further explanation about your response. Name Organisation Job description Buy/sell side, credit, etc. Country 10. May we contact you to inform you of future user questionnaires? Yes No Page 7

8 8. Final page Thank you for taking the time to complete our questionnaire. The boards will discuss the feedback received on this questionnaire and the comment letters received on their exposure drafts when they resume their discussions in September Page 8

I. OVERVIEW OF FIRMS. Table of Contents FAIR VALUE MEASUREMENTS AND FINANCIAL REPORTING UPDATE PRESENTATION TO DALLAS CPA SOCIETY.

I. OVERVIEW OF FIRMS. Table of Contents FAIR VALUE MEASUREMENTS AND FINANCIAL REPORTING UPDATE PRESENTATION TO DALLAS CPA SOCIETY. Table of Contents Overview of Firms 2 ASC 820: Fair Value Measurements and Disclosures 5 FAIR VALUE MEASUREMENTS AND FINANCIAL REPORTING UPDATE PRESENTATION TO DALLAS CPA SOCIETY MAY 4, 2012 ASC 805: Business