Deloitte Case

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The FASB recently issued further guidance to assist with the interpretation of ASC 820- 10 (Statement 157):
• FASB Staff Position FAS 157-3: Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active was issued in October 2008 to clarify the application of ASC 820-10 (Statement 157) in a market that is not active and to provide an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active. This FSP is effective upon issuance, including prior periods for which financial statements had not yet been issued. This FSP is included within ASC 820-10.

• FASB Staff Position FAS 157-4: Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly was issued in April 2009 to provide additional guidance for estimating fair value in accordance with ASC 820-10 (Statement 157) when the volume and level of activity for the asset or liability have significantly decreased, and to provide guidance on identifying circumstances that indicate a transaction is not orderly. This FSP is effective for interim and annual reporting periods ending after June 15, 2009, to be applied prospectively. This FSP is not yet included within the ASC, however, prior to the ASC effective date we would expect this guidance to also be incorporated into ASC 820-10.

As noted in Addendum – 2007 above, the conclusions reached in the above case were not affected by ASC 820-10 (Statement 157); however, ASC 820-10 (Statement 157) may affect how Ace Company measures the fair value of the forward purchase contract and, therefore, how the proceeds are allocated between the purchase contract and the note. Some companies have recently been revisiting their capital structures, including both equity and debt instruments, in response to changes in market conditions....
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