FASB issues exposure draft on Topic 825: Financial Instruments

BVWireIssue #118-1
July 11, 2012

Just before the holiday on July 4, the Financial Accounting Standards Board (FASB) released its "Proposed Accounting Standards Update: Financial Instruments (Topic 825): Disclosures About Liquidity Risks and Interest Rate Risk."

“The Update is intended to address stakeholders’ concerns about how organizations disclose their exposures to certain risks related to financial assets, liabilities, obligations, and other financial instruments,” says the FASB, in a related announcement. “Specifically, the ASU proposes new disclosures related to liquidity risk and interest rate risk, two risks that were prominent during the recent financial crisis and that continue to be relevant to reporting organizations on an ongoing basis.”

Under the proposed liquidity disclosures standards, the reporting organization would provide information about any risks it might encounter in meeting its financial obligations. This would apply to all public, private, and not-for-profit organizations. “However, the nature of the disclosures will depend on whether the reporting organization is considered a financial institution, as defined by the proposed update.” The proposed interest rate risk disclosures would apply only to financial institutions and would provide information about the exposure of the entity’s assets and liabilities to fluctuations in market interest rates. Comments to the exposure draft are invited by Sept. 25, 2012.

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