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Financial Accounting Standards Board Provides Expanded Information About Fair Value Measurements

Last fall, the Financial Accounting Standards Board (FASB) issued Statement No.157, Fair Value Measurements (FAS 157), which was designed to provide expanded information to investors about the extent to which entities such as hedge funds measure fair value, according to

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Last fall, the Financial Accounting Standards Board (FASB) issued Statement No.157, Fair Value Measurements (FAS 157), which was designed to provide expanded information to investors about the extent to which entities such as hedge funds measure fair value, according to Grant Thornton LLP’s latest edition of HedgeFund Adviser.

The statement, effective for financial statements as of Nov. 15, 2007, creates a singular definition of fair value and establishes a more concrete framework for measuring fair value in generally accepted accounting principles (GAAP).

With more than 40 accounting standards within GAAP that require funds to measure assets and liabilities at fair value, FAS 157 provides necessary clarification.

There are three key valuation techniques employed to measure fair value: the market approach, income approach and/or cost approach. These valuation techniques used to measure fair value will maximize the use of observable inputs and minimize the use of unobservable inputs.

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