GASB ISSUES FINAL STATEMENT ON
FAIR VALUE MEASUREMENT AND APPLICATION
Norwalk, CT, March 2, 2015—The Governmental Accounting
Standards Board (GASB) has issued final guidance on accounting and
financial reporting issues related to fair value measurements, which
primarily applies to investments made by state and local governments.
GASB Statement No. 72, Fair Value Measurement and Application,
defines fair value and describes how fair value should be measured, what
assets and liabilities should be measured at fair value, and what
information about fair value should be disclosed in the notes to the
financial statements.
Under the new Statement, fair value is defined as the price that would
be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date.
Investments, which generally are measured at fair value, are defined as
a security or other asset that governments hold primarily for the
purpose of income or profit and the present service capacity of which
are based solely on their ability to generate cash or to be sold to
generate cash.
"The Board´s new guidance responds to stakeholder requests for greater
clarity regarding the fair value standards and for improved consistency
and comparability in governments´ fair value measurements and
disclosures," said GASB Chairman David A. Vaudt. "The Board believes
that requiring governments to provide additional information about how
they measure the fair value of their assets and liabilities will
increase financial statement users´ understanding of the nature of the
fair value information they receive and enhance users´ ability to make
decisions with that information."
Prior to the issuance of Statement 72, state and local governments have
been required to disclose how they arrived at their measures of fair
value if not based on quoted market prices. Under the new guidance,
those disclosures have been expanded to categorize fair values according
to their relative reliability and to describe positions held in many
alternative investments.
The full text of Statement 72 on fair value and a GASB In Focus on fair value are available on the GASB website, www.gasb.org.
About the Governmental Accounting Standards Board
Established in 1984, the GASB is the independent, private-sector
organization based in Norwalk, Connecticut, that establishes accounting
and financial reporting standards for U.S. state and local governments
that follow Generally Accepted Accounting Principles (GAAP). These
standards are recognized as authoritative by state and local
governments, state Boards of Accountancy, and the American Institute of
CPAs (AICPA). The GASB develops and issues accounting standards through a
transparent and inclusive process intended to promote financial
reporting that provides useful information to taxpayers, public
officials, investors, and others who use financial reports. The
Financial Accounting Foundation (FAF) supports and oversees the GASB.
For more information, visit www.gasb.org.