Disclosures about fair value measurements
The IASB and FASB tentatively decided:
- that when a non-financial asset is measured subsequently at fair value and the highest and best use of the asset differs from its current use, an entity must disclose that fact and the reasons why the asset is being used in a manner that differs from its highest and best use. The boards also tentatively decided to require that disclosure whether the asset is recognised at fair value in the statement of financial position or the fair value is disclosed and not to limit the scope of that disclosure to particular non-financial assets
- to require an entity to disclose any transfers between Level 1 and Level 2 of the fair value hierarchy
- for assets and liabilities for which disclosure of fair value is required, to require an entity to disclose the level in which a fair value measurement would be categorised within the fair value hierarchy (Level 1, 2 or 3), even if those assets and liabilities are not subsequently measured at fair value in the statement of financial position. The other disclosure requirements for fair value measurements would not be required for such assets or liabilities.
The unit of account for fair value measurements
The boards tentatively decided that clarifying the unit of account for assets and liabilities measured at fair value in particular situations (eg investments in associates, subsidiaries and jointly controlled entities accounted for in accordance with IAS 27 Consolidated and Separate Financial Statements, IAS 28 Investments in Associates and IAS 31 Interests in Joint Ventures) is outside the scope of the fair value measurement project because the project focuses on 'how' to measure fair value, not on 'what' is being measured at fair value or 'when' fair value should be used.
The boards tentatively decided to clarify that although the concepts of highest and best use and valuation premise are not relevant for financial instruments, the notion of value maximisation is fundamental to the fair value measurement of financial instruments because market participants would enter into transactions that maximise the fair value of financial instruments.