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Fair Value Financial Reporting

The need for fair value determinations has increased dramatically with the issuance of FASB Accounting Standards Codification (ASC) 805, 350, and 820. The prevalence of fair value financial reporting has been further expanded with the issuance of FASB ASC 825-10 and the convergence of United States generally accepted accounting principles with the International Financial Reporting Standards.

One of the requirements of fair value financial reporting is the valuation of each of the tangible and intangible assets acquired in a business acquisition and reconciliation of these fair values with the purchase price. Financial instruments, contracts, embedded options, debt instruments and other liabilities must also be valued and reported in accordance with the fair value standard as defined in FASB ASC 820.

Fair value reporting purpose engagements tend to be very complex and are subject to a detailed review by the company’s external auditor under AICPA Professional Standard AU-C section 620, Using the Work of an Auditor’s Specialist.