PricewaterhouseCoopers is pleased to offer this guide to help reporting entities meet the challenges of implementing and applying an important set of accounting and reporting standards: Financial Accounting Standards Board Statement No. 157, Fair Value Measurements (FAS 157), FASB Statement No. 155, Accounting for Certain Hybrid Financial Instruments – an amendment of FASB Statements No. 133 and 140, and FASB Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB Statement No. 115.
Recent events such as the current turmoil in the credit markets and widespread defaults on sub-prime mortgage loans, accompanied by increasing investor focus on the methods used by management to value assets and liabilities, highlight the importance of fair value measurements. FAS 157 is a principles-based standard that, with few exceptions, impacts all fair value measurements in a reporting entity's balance sheet. In this PwC guide, we describe the key concepts and requirements of FAS 157 and the fair value option, and include specific discussion of the impact of the fair value measurement requirements in significant accounting areas such as investments, impairments, and business combinations. We also address fair value measurements in the context of certain industry-specific matters. The purpose of the guide is to clarify a complex area of accounting by bringing together in one publication all of the relevant PricewaterhouseCoopers guidance on fair value measurements; to provide an overall framework for the application of fair value measurements; to highlight key questions and answers; and to offer our perspectives throughout, based on our analysis of the guidance and experience in applying it. The FASB is in the process of issuing additional interpretive guidance on FAS 157. We will keep you up to date on new guidance through further communications whenever necessary and useful.While this guide is intended to clarify the fundamental principles of fair value measurements and to highlight key points that should be considered when determining the fair value of assets and liabilities, it is not a substitute for thorough analysis of the facts and circumstances surrounding specific fair value measurements, nor should it be read in place of the relevant accounting literature. Nonetheless, we trust that you will find in these pages the information and insights you need to work with greater confidence and certainty when applying fair value measurements.
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