As part of an organized global effort to reduce the inconsistent measurement of fair value and the application of impairment guidance for financial assets, FASB has taken swift action with rapid expansion of fair value accounting guidance intended to provide relevant and transparent information to users of financial statements. Similarly, IASB has developed a timeframe for increasing guidance pertaining to recognition and measurement of financial instruments. FASB and IASB collaboration on these projects is paramount due to the impending convergence towards a common, international standard of financial reporting.
While the markets’ decline appear to have leveled off through the first half of 2009, establishing fair value for certain investments and assessing asset impairment will continue to be challenging aspects of the 2009 financial statement reporting process due to new and developing pronouncements from domestic and international standard setting organizations.
The Evolution of Investment Accounting for Insurance Enterprises
In 1982, FASB issued SFAS 60, Accounting for Insurance Enterprises, which established accounting guidance specific in nature to insurance companies. SFAS 60 required that insurance companies carry fixed maturity securities at amortized cost and equity securities at fair value. Fluctuations in fair value were reflected as unrealized gains and losses within the equity component of the balance sheet, and gains and losses realized upon disposal were recognized within earnings. SFAS 60 introduced the concept of ‘other than temporary’ decline in fair value, but merely mandated that such declines be recognized as if a sale had occurred. Continue reading ‘Standard Setters on Record-Setting Pace for Issuance of Fair Value Accounting Guidance’ »