The SEC's Office of the Chief Accountant and FASB Staff issued clarifications of FASB Statement 157 on the use of fair value measurements and "mark to market" accounting, particularly in instances of other than temporary impairment.
The clarification provides guidance on the following questions:
- Can management's internal assumptions (e.g., expected cash flows) be used to measure fair value when relevant market evidence does not exist?
- How should the use of "market" quotes (e.g., broker quotes or information from a pricing service) be considered when assessing the mix of information available to measure fair value?
- Are transactions that are determined to be disorderly representative of fair value? When is a distressed (disorderly) sale indicative of fair value?
- Can transactions in an inactive market affect fair value measurements?
- What factors should be considered in determining whether an investment is other-than-temporarily impaired?
The text of the clarification can be found at: