ASC Definition of Fair Value
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The FASB Accounting Standards Codification (ASC) Fair Value Measurements and Disclosures (ASC 820), formerly FAS 157, defines fair value as "the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date." In other words the new definition of fair value represents the exit price, not the entry price of a transaction.
ASC 820 provides guidelines for determining the fair value of assets and liabilities. It requires using a three level hierarchy of inputs for measuring the fair value of derivatives and hedging products, and it expands the level of disclosures on financial statements. ASC 820 is effective for financial statements issued under GAAP for fiscal years beginning after November 15, 2007.
In December 2009, ASC 820 was updated with changes and clarifications which mostly deal with transfers in and out of Levels 1 and 2, and Level 3 inputs. Specific changes can be found on the FASB website.
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ASC 820 Services for Public and Private Entities
If you are interested in learning more about ASC 820 (formerly FAS 157), you can download a ASC 820 white paper.
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