|  | | 2008 News and Press Releases | | |
HEADLINE NEWS:
SEC's Atkins Calls for Fair-Value Guidance, The commissioner thinks companies may need help in estimating values when there are no yardsticks to measure them.
David M. Katz
cfo.com. April 25, 2008
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EXCERPT: The Securities and Exchange Commission needs to issue guidance on how corporations should estimate the fair value of assets and liabilities with no active markets, SEC Commissioner Paul Atkins told Reuters on Thursday. "If you have no value for something because there are no market values to be reflected, then you have to ask whether or not that is truly reflective of what the asset is worth," Atkins told the news service. "I think we need to come out with guidance to help people deal with that situation," he said. Atkins appeared to be referring to the third—and most cloudy— measurement of fair value according to a hierarchy the Financial Accounting Standards Board set up under Statement No. 157, Fair Value Measurements. Within the hierarchy, there are three levels of fair-value estimates in a descending order based on the relative amounts of market information available: In level 1, an asset or liability can be valued based on a quoted price in an active market; in Level 2, it can be valued based on information other than quoted prices but with "observable market data"; and in Level 3, it can be valued only through "unobservable inputs" and the best available information under the circumstances. In his interview with Reuters, Atkins suggested that issuers needed more help in estimating Level 3-type values. "Something is clearly not worth zero. It's worth something, so what do you benchmark it to? Between us and the accounting firms and the investment banks... we need to come up with some good guidance for people," he said. |
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