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Financial Accounting Series Statement of Financial Accounting Standards No. 159 The Fair Value Option for Financial Assets and Financial Liabilities Including an amendment of FASB Statement No. 115 NO. 289-A FEBRUARY 2007 Financial Accounting Series Financial Accounting Standards Board of the Financial Accounting Foundation For additional copies of this Statement and information on applicable prices anddiscount rates contact: Order DepartmentFinancial Accounting Standards Board401 Merritt 7PO Box 5116Norwalk, Connecticut 06856-5116 Please ask for our Product Code No. S159. FINANCIAL ACCOUNTING SERIES (ISSN 0885-9051) is published monthly by theFinancial Accounting Foundation. Periodicals?postage paid at Norwalk, CT and atadditional mailing offices. The full subscription rate is $205 per year. POSTMASTER:Send address changes to Financial Accounting Standards Board, 401 Merritt 7, PO Box5116, Norwalk, CT 06856-5116. Summary Why Is the FASB Issuing This Statement? This Statement permits entities to choose to measure many ?nancial instruments and certain other items at fair value. The objective is to improve ?nancial reporting byproviding entities with the opportunity to mitigate volatility in reported earnings causedby measuring related assets and liabilities differently without having to apply complexhedge accounting provisions. This Statement is expected to expand the use of fair valuemeasurement, which is consistent with the Board?s long-term measurement objectivesfor accounting for ?nancial instruments. What Is the Scope of This Statement?Which Entities Does It Apply to andWhat Does It Affect? This Statement applies to all entities, including not-for-pro?t organizations. Most of the provisions of this Statement apply only to entities that elect the fair value option.However, the amendment to FASB Statement No. 115, Accounting for CertainInvestments in Debt and Equity Securities, applies to all entities with available-for-saleand trading securities. Some requirements apply differently to entities that do not reportnet income. The following are eligible items for the measurement option established by this Statement: 1. Recognized ?nancial assets and ?nancial liabilities except: a. An investment in a subsidiary that the entity is required to consolidateb. An interest in a variable interest entity that the entity is required to consolidate c. Employers? and plans? obligations (or assets representing net overfunded positions) for pension bene?ts, other postretirement bene?ts (includinghealth care and life insurance bene?ts), postemployment bene?ts, em-ployee stock option and stock purchase plans, and other forms of deferredcompensation arrangements, as de?ned in FASB Statements No. 35,Accounting and Reporting by De?ned Bene?t Pension Plans, No. 87,Employers? Accounting for Pensions, No. 106, Employers? Accounting forPostretirement Bene?ts Other Than Pensions, No. 112, Employers? Accounting for Postemployment Bene?ts, ..
CONTENTS Paragraph Numbers Objective…………………………………………………………………….. 1?2 Standards of Financial Accounting and Reporting: The Fair Value Option …………………………………………………… 3?5 Key Terms ……………………………………………………………….. 6 Applying the Fair Value Option ………………………………………… 7?14 Scope of Eligible Items ………………………………………………. 7 Recognized Financial Assets and Liabilities That Are Not Eligible Items ……………………………………………………….. 8 Election Dates…………………………………………………………. 9?11 Instrument-by-Instrument Application……………………………….. 12?14 Presentation of Items Measured at Fair Value under This Statement … 15?16 Statement of Financial Position ……………………………………… 15 Cash Flow Statement …………………………………………………. 16 Disclosures Applicable to This Statement and Statement 155………… 17?22 Required Disclosures as of Each Date for Which an Interim or Annual Statement of Financial Position Is Presented …………….. 18 Required Disclosures for Each Period for Which an Interim or Annual Income Statement Is Presented ……………………………. 19?20 Other Required Disclosures ………………………………………….. 21?22 Application by Not-for-Pro?t Organizations …………………………… 23 Effective Date ……………………………………………………………. 24?30 Application to Eligible Items Existing at the Effective Date ………. 25?27 Available-for-Sale and Held-to-Maturity Securities ………………… 28?29 Early Adoption………………………………………………………… 30 Appendix A: Background Information and Basis for Conclusions ……… A1?A54 Appendix B: Illustrative Fair Value Disclosures………………………….. B1?B9 Appendix C: Amendments to Existing Pronouncements…………………. C1?C7 Statement of Financial Accounting Standard