Deloitte: Pay More Attention to New FASB Valuation Standard

May 16, 2007 ( - Only 6 % of companies in a new survey have assessed how Financial Accounting Standards Board (FASB) Statement No. 157 (SFAS 157), Fair Value Measurement, will impact the valuation of their assets and liabilities.

news release from Deloitte about the poll said companies should consider looking at implications early because the new standard could be more complicated than it appears at first review.

According to the news release, SFAS 157 enhances guidance on how to measure assets and liabilities at fair value and consolidates fair value measurement into one accounting standard. SFAS 157 also introduces new disclosures intended to highlight the reliability of fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007 (January 1, 2008 for calendar year-end companies).

“Perhaps one of the biggest changes in the new rule is an outline of how certain intangible assets are valued, something valuation specialists have tried to develop through a patchwork of tax, accounting, and valuation concepts over the years,” said Stamos Nicholas, leader of Deloitte FAS’ Business Valuation practice, in the news release.

Approximately half (47%) of the participants indicated that the requirement under SFAS 157 to apply exit price vs. entry price when assessing an asset’s fair value would have some effect on their company. More than half (57%) of the participants reported their companies have yet to assess the impact, or do not know if they have begun to assess the impact of SFAS 157 on their fair value estimates.

Deloitte FAS recommends the following key guidelines for companies: 

  • While SFAS 157 is not applicable to most companies for several months, companies should start to assess the provisions of the new standard and the effects on a company’s assets and liabilities that are measured at fair value.
  • Consider current fair value requirements (e.g., SFAS 142, Goodwill and Other Intangible Assets) that need to be assessed in order to be compliant with SFAS 157.
  • On a go-forward basis, consider SFAS 157 implications for business combinations (SFAS 141) or other future fair value requirements.

The Deloitte FAS poll was conducted during the Web cast, “SFAS 157 Fair Value Measurements for Corporate Assets: It’s Not Business as Usual.” Of approximately 1,500 participants, a majority were senior level managers within finance and accounting departments in the financial services, telecommunications, and manufacturing industries.