On 30 November 2006 the International Accounting Standards Board (IASB) published for public comment a discussion paper setting out its preliminary views on providing consistency in the measurement of fair value, when already prescribed under existing International Financial Reporting Standards (IFRSs).
The proposal is aimed at addressing requests from a number of interested parties seeking additional guidance on the measurement of fair value. The proposals would not introduce new measurements at fair value. IFRSs already require some assets, liabilities and equity instruments to be measured at fair value in some circumstances. However, guidance on measuring fair value is dispersed throughout IFRSs and is not always consistent. The IASB believes that establishing a concise definition of fair value and a single source of guidance for all fair value measurements required by IFRSs will both simplify IFRSs and improve the quality of fair value information included in financial reports. The IASB therefore added this topic to its agenda in September 2005.
In the United States the Financial Accounting Standards Board (FASB) has recently issued an accounting standard, SFAS 157 Fair Value Measurements, on which work was well advanced before the IASB launched its own project. SFAS 157 establishes a single definition of fair value together with a framework for measuring fair value for financial reports prepared in accordance with US generally accepted accounting principles (US GAAP). Consistently with its commitment to the convergence of IFRSs and US GAAP, the IASB decided to use the US standard as the starting point for its own deliberations. Today’s discussion paper is the first stage of the IASB’s project.
Introducing the discussion paper, Sir David Tweedie, IASB Chairman, said:
The use of fair value in financial reporting is of great interest to preparers, auditors, users and regulators. We believe that an essential ground-clearing step in the debate is to establish a clear international definition of fair value and a consistent framework for measuring it. This discussion paper is not about expanding the use of fair value in financial reporting, but about how to codify, clarify and simplify the guidance that is at present dispersed widely in IFRSs. We are therefore keen to receive views on the ideas set out in the paper.
The Discussion Paper was open for comment until 2 April 2007.