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The Financial Accounting Standards Boardâs (FASBâs) standard FAS 157 takes effect as of November 15, 2007. A company reporting at year-end (or any time after mid November) will be obliged to comply with FAS 157.
FAS 157 will change current practice by:
â¢ Defining fair value: âFair value is 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.â
â¢ Requiring certain methods to be used to measure fair value: gauged as a market-based measurement, not an entity-specific measurement, based on assumptions market participants would make in pricing the asset or liability.
â¢ FAS 157 establish a three-level hierarchy for measuring âfair valueâ. In simple terms it means - no assets (say, to secure a loan) - no lending - no lending, no more bank! All US banks will have to publish asset figures in conformity with FAS 157 by spring 2008. The three levels are defined according to the ease an asset may be bought or sold. For example, level 1 includes US bonds or gold bullions. Level 2 includes assets not so easily marketable as level 1 but sufficiently tradable, and level 3 is the least easily tradable, typically, artificial financial instruments.
â¢ Expanding disclosures about fair value measurements. This implies changing the model and processes by which these measurements are calculated and presented. This will include the workflow engine (software application) used to maximise and enforce regulatory discipline and internal controls, minimise/remove material weakness and prevent oversight.
FAS 157 impact IFRS (International Financial Reporting Standards), Sarbanes-Oxley Act, MiFID (Markets in Financial Instruments Directive), Basel II Accord, Solvency II Accord, (ALM) Asset & Liability Management, and other related frameworks.
Peach has an effective pill for your FAS 157 headache. Our purpose-built CMP methodology and templates enable compliance faster and more cost effectively.
Instead of working in a silo, we can cross reference FAS 157 to the other relevant frameworks for overlaps, thus integrating FAS 157 with other self-attestation audit questionnaire checklists and processes, avoiding duplication or triplication of information and implementation costs.
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