VideoMarie Leone, CFO.com | US
November 15, 2007
- Point Taken
Correction and clarification
As pointed out by Mr. Hopkins, and is now reflected in the article:
For fiscal years beginning after November 15, 2007, companies are required to implement FAS 157 for financial assets and liabilities, as well as for any other assets and liabilities, that are already carried at fair value on a recurring basis in financial statements. However, several FASB members mentioned that proactive companies will begin to work on valuations as soon as possible.Posted by Marie Leone | Nov 15, 2007 3:34 PM ET
- Errors in article
Error 1: The effective date for SFAS 157 depends on each company's year end. In the words of the standard, the effective date is "for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years." Given that most companies in the US are December 31 fiscal year end, the rules go into effect on January 1 for most. I know of no companies that will begin applying the standard tomorrow, because I know of no companies with a fiscal year beginning on November 16.
Error 2: The standard does not require FV measurement for any asset or liability that is not already measured at FV. It simply clarifies and centralizes the disparate (and sometimes conflicting) FV measurement guidance that existed in other standards. (So it is false to say that ?companies will have to begin booking items that are easily measurable at fair value, such as derivatives, loan-servicing assets and liabilities, and some loans and debt linked to business combinations.?) In addition, the standard provides more comprehensive disclosure for the various types of fair values already reported in the balance sheet. Most of the "157 losses" of which you will surely hear in Q1 1998 will be the result of (a) misapplication of existing guidance, (b) inappropriate aggregation and netting of FV assets across asset types and (c) the opacity of the current FV reporting system.Posted by Patrick Hopkins | Nov 15, 2007 3:02 PM ET
- No Bank Holiday Here
Thanks for your comment Mr. Potter. As far as I can tell, most Level 3 assets don't qualify for the deferment. In fact, financially troubled banks are taking a big FAS 157 hit, according to a report issued by The Royal Bank of Scotland Group.
Posted by Marie Leone | Nov 15, 2007 1:32 PM ET
- FAS 157 Deferral
Do the Banks get a vacation and defer the write-off of their level 3 assets?
Posted by Daniel Potter | Nov 15, 2007 12:44 PM ET
