Companies made little change to their fair value measurement approaches as a result of new accounting rules, but they made plenty of changes to disclosures, some of them a little perplexing, according to a recent PwC analysis.

The Big 4 firm studied first-quarter compliance with Accounting Standards Update No. 2011-04, which made some modifications to U.S. Generally Accepted Accounting Principles primarily to converge with a major upgrade to fair value measurement in International Financial Reporting Standards. The U.S. guidance focused on clarifying existing fair value measurement guidance and to require some new disclosures to make it consistent with IFRS. The ASU took effect for interim and annual reporting periods beginning after Dec. 15, 2011, making the first quarter of 2012 the first period the new requirements were in effect.

PwC analyzed the financial statements of 37 companies across a variety of industries to study their first-quarter compliance with the new standard, although it's not clear whether PwC analyzed reports of its own clients, other companies, or some combination. The firm did not note any widespread changes in how companies measured fair value, so it focused its attention on the application of new disclosure requirements. PwC said it expects companies' disclosures to change over time as they receive feedback from the Securities and Exchange Commission and from investors.

With respect to quantitative disclosures required in the new standard, PwC said information was not always comprehensive and was sometimes difficult to follow. “For many large companies, there was a significant effort involved in gathering information to complete the new disclosures,” the firm wrote. “As a result, initial disclosures were likely focused on substantial compliance, rather than readability.

The analysis said companies were not always clear in their disclosures about what was excluded from the quantitative tables of significant unobservable inputs for assets and liabilities measured at Level 3 of the fair value hierarchy, which relies solely on judgment and unobservable inputs. The firm also said it found inconsistency in the inclusion of ranges and weighted averages of significant unobservable inputs.

PwC was especially troubled that it appeared some preparers applied a limited exception permitted for information provided by third-party pricing services despite the fact that it appeared those preparers had the relevant data from their pricing services. The SEC and the Public Company Accounting Oversight Board have made it clear they expect management to take responsibility for its fair value measurements even when they rely heavily on third-party pricing services for the critical data. It's possible, PwC surmises, that companies left out information they obtained late in the close and reporting process, giving them insufficient time to validate it and apply appropriate controls before including it in a footnote disclosure.

“It is possible that as more preparers request more detailed information from their third-party pricing vendors use of this exception may become more infrequent over time,” PwC wrote. “Already, some pricing services have provided input information and other are expected to soon follow suit.”

The PwC report also offers observations on disclosure formats, disclosures by sector, and other key aspects of the new requirements.