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August 26, 2007 FASB Forms Fair Value Resource Group
As part of its mission to improve and enhance the quality, consistency, and comparability of financial statements, the FASB has formed a resource group to address what additional and more specific valuation guidance is needed for financial reporting. This will go beyond the guidance provided in FASB Statement No. 157, Fair Value Measurements. This formation of this group was formally anounced on June 21, 2007, and the first meeting is expected to be held in October 2007.
Members of the group consist of representatives from the Big 4 audit/valuation firms, mid-tier audit/valuation firms, Non-Big 4 Valuation firms, Professional Standards Setters, financial statement preparers, financial statement users, and observers from the SEC, PCAOB, AICPA and IASB.
Right now, there is significant diversity in practice on how the fair value standard is applied to a variety of assets, especially intangible assets valued in conjunction with an acquisition. Much of this diversity is in the details of how specific valuation methodologies should be applied. Since few intangible assets are bought and sold apart from a business enterprise, valuators are left with theoretical approaches with little empirical support in the broader financial community (i.e., the real world). Formation of this group will hopefully get everyone on the same page with these issues. The end result will be less time and costs for all involved with the valuation process, including clients, their auditors and valuation specialists.
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