After its failed effort to compel eleventh-hour, year-end disclosures about troubled financial instruments, the Financial Accounting Standards Board is trying a different approach.

FASB published a second try at a proposed staff position that would require entities to make interim disclosures about uses of fair value to measure financial instruments, beginning with the first quarter of 2009. The guidance would amend FASB Statement No. 107: Disclosures about Fair Value of Financial Instruments and APB Opinion No. 28: Interim Financial Reporting. It would not change the nature of the disclosures, but would specify that disclosures must be made in interim, not just annual, periods.

FAS 107 requires entities to disclose either in the body of financial statements or in the notes the fair value of financial instruments “for which it is practicable to estimate that value,” along with the carrying amounts and how they relate to amounts reported in the statement of financial position. It also requires entities to disclose the methods and significant assumptions used to estimate the fair value of financial instruments.

FASB is starting up a long-term project with the International Accounting Standards Board to address the current complexity in recognition and measurement of financial instruments. But in the meantime, FASB wanted to flesh out disclosures that would improve comparability and inspire more dialogue between preparers and users of financial statements about where fair value is used and how it is measured. As such, it thought more frequent disclosure would be a good starting point for now.

The board published a crisis attempt in the waning days of 2007 to give entities some ability to show in their 2008 financial statements where losses originated from problems with liquidity vs. other factors. The guidance was pummeled from all sides, however, considered too complex and difficult to implement in such a short time frame. The board promised to come back with at least more disclosure requirements while it works on the longer-range solutions.

Comments on the latest proposal are due March 2, with the guidance planned to take effect for all interim or annual reporting periods ending after March 15, 2009.

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