Statements 627: Fair Value Accounting In The Wild Plenty of ink has been spilled in the financial press about the coming implementation of Statement 157, "Fair Value Measurements." Most of that coverage is negative: companies have been pushing back on the standard, petitioning the FASB to delay its implementation for one more year. "Level 3" has worked its way into investment jargon, synonymous with the already-cliched "mark-to-myth" designation.
What casual observers miss: Statement 157 doesn’t appreciably expand the use of fair value measurements. What it expands, however, is the amount of disclosures surrounding fair value reporting. Without those disclosures, nobody could make clever "mark-to-myth" remarks about Level 3 assets. Another miss: fair value reporting is nothing new. In fact, before the controversial Statement 157 was issued, the FASB’s two previous statements actually expanded the use of fair value measurements - and their arrival went unheralded. That may be due to the fact that Statements 155 and 156 were elective, rather than required to be adopted by companies. Statement 159, issued after the Statement 157 demonification began, was also elective - and it’s come in for its share of criticism ever since.
This report looks at the implementation of "Statements 627" in the real world. (That’s 155 + 156 + 157 + 159.) Lessons: you don’t hear gripes about fair value reporting when firms want it. And for all the clamor about Statement 157 at the large investment banks, there’s been surprising level of adoption among the small firms.