Handbooks | November 2023

Insight

Handbook: Fair value measurement

Latest edition: Applying fair value measurement and disclosure guidance under US GAAP and IFRS® Accounting Standards.

Mahesh Narayanasami

Mahesh Narayanasami

Partner, Dept. of Professional Practice, KPMG US

+1 212-954-7355

Robin Van Voorhies

Robin Van Voorhies

Senior Director, Dept. of Professional Practice, KPMG US

+1 617-988-5637


We address frequently asked questions about applying the fair value measurement and disclosure guidance, highlighting the differences between US GAAP and IFRS Accounting Standards. This latest edition includes new and updated guidance and interpretations, particularly for ASU 2022-03 on contractual sale restrictions, which becomes effective for public business entities in 2024.

Applicability

  • ASC 820 and IFRS 13
  • All companies whose financial statements include fair value estimates, either in measuring the carrying amount of assets and/or liabilities or in note disclosures. 

Measuring fair value in times of change

In recent years, companies have needed to respond and adapt to major economic changes, such as mounting inflation and interest rates, geopolitical events, the rise of artificial intelligence and climate-related matters. Any of these events may have prompted companies to reevaluate the judgments, inputs and critical assumptions underpinning their fair value measurements. In times of change, comprehensive disclosures about a company’s fair value measurements – including significant sources of estimation uncertainty – are critical to telling the company’s story effectively to users of the financial statements.

This edition of our Fair value measurement handbook includes a new series of questions and answers on applying the FASB’s new Accounting Standards Update (ASU) 2022-03 Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. Among other things, the ASU clarifies that a contractual restriction on the sale of an equity security is an entity-specific characteristic and is not considered in measuring the security’s fair value. 

Looking forward, the FASB plans to issue an ASU on crypto asset accounting and reporting, requiring in-scope crypto assets to be measured at fair value with fair value changes recorded in current-period earnings. In-scope crypto assets would also be subject to the disclosure requirements in ASC 820, Fair Value Measurement. The International Accounting Standards Board does not have a similar project in its work plan.

We are pleased to share our insight and practical guidance in this latest edition of our handbook. This publication will help you apply the principles of ASC 820 and IFRS 13 Fair Value Measurement and understand the key differences between the accounting standards.

Report contents

  • Scope and overview
  • The item being measured and the unit of account
  • Market participants
  • Principal, most advantageous and inactive markets
  • Valuation approaches and techniques, and inputs to valuation techniques
  • Fair value hierarchy
  • Highest and best use
  • Liabilities and own equity instruments
  • The portfolio measurement exception
  • Disclosures
  • Application issues

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