FASB forms resource group on valuation standards

BVWireIssue #57-4
June 27, 2007

Based on feedback to its Invitation to Comment on the need for valuation standards—over eighty comment letters, to date—and its recent April roundtable (see BVWire # 56-3), the Financial Accounting Standards Board is forming a resource group to provide more input on whether guidance is needed in applying SFAS 157 principles to fair value information required under U.S. GAAP.  According to last week’s announcement, the new group will draw members from a cross-section of auditing, accounting, and valuation professionals with significant experience in fair value and SFAS 157-related issues.  The group will hold its first meeting in third quarter 2007.

Judging from the April roundtable, the group may well focus on deciding the need for separate standards—or just additional guidance on SFAS 157.  In particular, at the meeting one FASB board member kept bringing up client bias, persistently challenging participants such as Bruce Bingham (representing the ASA) and Paul Barnes (Duff & Phelps) whether their current valuation conclusions were “supportable” or mere “opinion.” The dialogue with Paul went something like this:

FASB: How do you control for client bias?
Paul: This presupposes there is client bias.
FASB: I guarantee you there is client bias.
Paul: Our role is to reach our independent valuation conclusion according to [FSAS 157].
FASB: Is it supportable, or your best opinion?

To listen to the three-hour April roundtable by audio webcast, click here.  To review the eighty-plus comments received by the FASB on its Valuation Standards project, click here.

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