The US Financial Accounting Standards Board (FASB) on September 15 outlined a proposal to clarify guidance on measuring the fair value of equity securities and to revise an example relating to contractual restrictions that prohibit the sale of an equity security.
The amendments are intended to improve the comparability of financial information across reporting entities that have investments in equity securities measured at fair value that are subject to contractual restrictions preventing the sale of those securities.
Restrictions on the sale of securities could affect the measurement of their fair value under Topic 820, Fair Value Measurement. However, unclear guidance has resulted in differences in practice with respect to when contractual restrictions on the sales of securities are taken into account in measuring equity securities’ fair market value.
The amendment would clarify the issue by specifying that such contractual restrictions should not be considered in measuring fair value.
Comments are due by November 14.
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