Fair value

This subtopic governs how an investment company presents its financial position — either a statement of assets and liabilities or a statement of net assets — and the schedule (or condensed schedule) of investments that accompanies it. It sets bright-line disclosure thresholds (1 percent of net assets for registered/other investment companies; 5 percent for nonregistered investment partnerships), special presentation rules for multiple-class, master-feeder, and fund-of-funds structures, and requires contract-value reporting for fully benefit-responsive investment contracts held by qualified defined contribution plan trusts.

This Subtopic sets the note disclosure requirements for investment companies with complex capital structures — multiple-class funds, master-feeder arrangements, and funds of funds. Multiple-class funds must describe each class, the income/expense and gain/loss allocation method, class-specific fee arrangements, capital share transactions by class, and sales charges paid to affiliates. Feeder funds must describe the master-feeder structure, their percentage ownership of the master, and the master's accounting policies affecting them, while funds of funds must describe the structure and the valuation policy based on investee-reported values.

ASC 274-10 governs personal financial statements prepared for an individual, a married couple, or a family. The core rule is that assets are presented at their estimated current values and liabilities at their estimated current amounts on the accrual basis (274-10-25-1; 274-10-35-1), with a provision for estimated income taxes on the difference between those amounts and the related tax bases (274-10-35-15). The required statement is a statement of financial condition ending in net worth; a statement of changes in net worth and comparative statements are optional (274-10-45-4, 45-5).

This subtopic governs how broker-dealers account for investments in debt and equity securities, covering both clearance/settlement activities (General) and proprietary trading (Proprietary Trading Securities). The core rules are that all regular-way trades are reflected on a trade-date basis (320-940-25-1), and proprietary security positions — both inventory and obligations for short inventory positions — are measured initially and subsequently at fair value with unrealized gains and losses included in profit or loss (320-940-30-2, 35-1, 35-2).

ASC 320-965 tells health and welfare benefit plans how to account for their investments in debt and equity securities. Such securities are reported at fair value less costs to sell (if significant) at the financial statement date, and purchases and sales are ordinarily recorded on a trade-date basis. Settlement-date accounting is permitted only if the fair value did not change significantly between trade date and financial statement date and the transactions do not significantly affect the composition of plan assets available for benefits.

ASC 321-10 governs the accounting for investments in equity securities and other ownership interests (partnerships, unincorporated joint ventures, LLCs) that are not consolidated, not accounted for under the equity method, and not derivatives. The default rule is fair value measurement in the balance sheet with all unrealized holding gains and losses (and dividend income) recognized in earnings (321-10-35-1, 35-6). As an alternative, an entity may elect, investment by investment, a "measurement alternative" for an equity security without a readily determinable fair value: cost minus impairment, adjusted up or down for observable price changes in orderly transactions for identical or similar investments of the same issuer (321-10-35-2).

This subtopic tells investment companies how (and whether) to apply the equity method of Topic 323. The general rule is that an investment company does not use the equity method for its noncontrolling ownership interests; instead it measures those investments at fair value under Subtopic 946-320. The one exception is an investment in an operating entity that provides services to the investment company (e.g., an investment adviser or transfer agent), which is accounted for under the equity method if it otherwise qualifies.

This subtopic tells broker-dealers in securities how to account for equity investments or financing they provide to another entity as part of a financial-restructuring transaction, including investments made through a "bridge entity" formed to pool funds from several sources. Such investments (and related receivables and debt and equity securities) are measured initially at fair value (325-940-30-1) and subsequently at fair value (325-940-35-1). Consolidation of majority-owned investees is addressed by the broker-dealer consolidation guidance in 940-810-45-1.

ASC 325-944 was the insurance-industry ("Investments—Other, Insurance") guidance within the Investments—Other topic, but every paragraph in the subtopic (Sections 05, 15, 30, 35, 40, 45, and 50) has been superseded by Accounting Standards Update No. 2016-01. As a result, the subtopic contains no operative recognition, measurement, derecognition, presentation, or disclosure requirements. Entities in the insurance industry must instead apply the equity-security and other-investment guidance retained elsewhere, principally ASC 321 and ASC 320 as amended by ASU 2016-01.

This subtopic tells an investment company how to account for its "other investments" (investments other than debt and equity securities). Such investments are initially measured at transaction price, including commissions and other charges that are part of the purchase transaction, and are subsequently measured at fair value. Its scope mirrors the investment company Overall Subtopic scope in Section 946-10-15.

ASC 325-960 (paralleling 960-325) governs how a defined benefit pension plan accounts for and reports its investments and insurance contracts. The core rule is that plan investments—equity and debt securities, real estate, and other assets other than insurance contracts—are presented at fair value at the reporting date, with purchases and sales generally recorded on a trade-date basis; insurance contracts are presented the same way as in the plan's ERISA filing (fair value or contract value). Extensive disclosure is required by general type of investment, including the plan's interest in a master trust.

ASC 962-325 governs how a defined contribution pension plan reports its investments and insurance contracts. The core rule is that plan investments (including derivatives) are reported at fair value under Topic 820, with two exceptions: fully benefit-responsive investment contracts are reported at contract value, and insurance contracts as defined in Subtopic 944-20 are presented the same way as in the plan's ERISA Form 5500 filing (fair value or contract value). It also prescribes trade-date recording, presentation of investments by general type, master trust disclosures, and disclosures about benefit-responsive contracts.

ASC 325-965 (parallel to 965-325) governs how health and welfare benefit plans measure, present, and disclose their investments and insurance contracts. The core rule is that plan investments are reported at fair value less costs to sell, if significant, at the financial statement date, except that insurance contracts are presented as reported in the plan's ERISA Form 5500 filing (fair value or contract value) and fully benefit-responsive investment contracts of defined contribution plans are measured at contract value. Presentation is by general type of investment, with specified disclosures for benefit-responsive contracts and for plan interests in master trusts.

This Subtopic governs inventory accounting for entities in the oil and gas (extractive activities) industry, borrowing the scope of ASC 932-10-15. Its core rules are prohibitions: energy trading contracts that are not derivatives under Topic 815 may not be subsequently measured at fair value through earnings, and physical inventories may not be measured at fair value unless another Topic permits it. Exchanges (buying and selling inventory with the same counterparty) are directed to ASC 845-10-15-5 through 15-9.

ASC 350-60 governs the subsequent measurement, presentation, and disclosure of in-scope crypto assets (e.g., bitcoin-type fungible tokens). The core rule is that such assets are measured at fair value on the balance sheet with remeasurement gains and losses recognized in net income (350-60-35-1), replacing the old indefinite-lived intangible impairment-only model. Initial measurement, recognition, and derecognition remain governed by other GAAP (350-60-05-2).

This subtopic tells health and welfare benefit plans how to measure property, plant, and equipment on the plan's financial statements. Assets used in plan operations (buildings, equipment, furniture and fixtures, leasehold improvements) are carried at cost less accumulated depreciation or amortization, while real estate and other holdings held as plan investments are reported at fair value less costs to sell, if significant, as of the financial statement date.

ASC 410-20 governs legal obligations associated with the retirement of tangible long-lived assets that arise from acquisition, construction, development, and/or normal operation of the asset, including environmental remediation resulting from normal operations. An entity recognizes the fair value of the ARO liability in the period incurred if fair value can be reasonably estimated, and simultaneously capitalizes an equal asset retirement cost in the carrying amount of the related long-lived asset (410-20-25-4; 410-20-25-5). Fair value is normally measured with an expected present value technique discounted at a credit-adjusted risk-free rate, with later changes recognized as accretion expense and as revisions to estimated cash flows (410-20-30-1; 410-20-35-3).

ASC 470-30 governs how a *borrower* accounts for a participating mortgage loan — a mortgage in which the lender is entitled to share in appreciation in the fair value of the mortgaged real estate project, in its results of operations, or both. If the lender participates in fair value appreciation, the borrower recognizes a participation liability at the fair value of the participation feature at loan inception with an offsetting debt discount, remeasures the liability to current fair value each reporting period (adjusting the discount), and amortizes the discount to interest expense using the interest method. Participations in results of operations are charged to interest expense in the period incurred with a credit to the participation liability.

This Subtopic gives industry-specific presentation and disclosure rules for the borrowings and long-term obligations of depository and lending institutions. Significant categories of borrowings must appear as separate balance sheet line items (or one line with note detail of components), mortgage transfers treated as secured borrowings under Topic 860 must be shown as debt separately from advances, other notes payable and subordinated debt, and notes must describe the principal terms of each debt agreement. Fair value estimates of deposit liabilities must exclude core deposit intangibles.

ASC 715-20 governs the presentation and disclosure requirements for single-employer defined benefit pension and other postretirement benefit (OPEB) plans, and it confirms that a cash balance plan is a defined benefit plan. It requires employers to disclose, separately for pension and OPEB plans, reconciliations of the benefit obligation and plan assets, funded status and where it is recognized on the balance sheet, plan asset fair value information by class, weighted-average assumptions, expected future benefit payments and contributions, and amounts in AOCI not yet recognized in net periodic benefit cost. On the face of the income statement, only the service cost component goes with other compensation cost; all other components must be presented separately and outside any subtotal of income from operations.

ASC 718-30 governs share-based payment awards that are classified as liabilities rather than equity (e.g., cash-settled stock appreciation rights). Liability awards use the same grant-date measurement objective as equity awards, but the measurement date is the settlement date, so the liability is remeasured at fair value (or intrinsic value if a nonpublic entity so elects) at every reporting date through settlement. Changes in value during the requisite service (or nonemployee vesting) period are recognized as compensation cost in proportion to service rendered; changes after that period are expensed immediately in the period of change.

ASC 720-25 governs how a resource provider (any entity) accounts for contributions it makes, including unconditional promises to give. Contributions made are recognized as expenses in the period made, with a corresponding decrease in assets or increase in liabilities, and are measured at the fair value of the assets given (or of the donee liabilities cancelled). Conditional promises are not recognized until the barrier is overcome, using the same conditionality analysis as the contributions received guidance in 958-605.

This Subtopic gives industry-specific guidance on how a mining entity measures mineral rights and other mining assets in a business combination purchase price allocation. It requires that value beyond proven and probable reserves (VBPP) be included in the value allocated to mining assets to the extent a market participant would include it, and that anticipated future mineral price fluctuations be reflected consistently with marketplace participant expectations.

This Subtopic tells an investment company (as defined in Topic 946) when consolidation applies. The general rule: an investment company does not consolidate an investee that is not itself an investment company, even if it holds a controlling financial interest; instead that interest is measured at fair value under Subtopic 946-320. The one exception is a controlling financial interest in an operating entity that provides services to the investment company (e.g., an investment adviser or transfer agent), which must be consolidated.

ASC 815-10 is the Overall subtopic of the derivatives and hedging Topic: it defines what a derivative instrument is, sets the scope (including a long list of scope exceptions), and requires that derivatives be recognized as assets or liabilities on the statement of financial position and measured at fair value. A contract is a derivative only if it has (1) one or more underlyings and one or more notional amounts or payment provisions, (2) no or a smaller-than-usual initial net investment, and (3) the ability to be settled net (815-10-15-83). If conditions are met, an entity may elect to designate a derivative as a fair value hedge, cash flow hedge, or hedge of foreign currency exposure (including a net investment in a foreign operation).

ASC 815-15 governs when a derivative-like feature embedded in a contract that is not itself a derivative in its entirety (a "hybrid instrument") must be separated ("bifurcated") from the host contract and accounted for as a standalone derivative under Subtopic 815-10. Bifurcation is required if and only if all three criteria in 815-15-25-1 are met: the embedded feature's economic characteristics and risks are not clearly and closely related to the host, the hybrid is not already remeasured at fair value through earnings, and a freestanding instrument with the same terms would be a derivative. As an alternative, an entity may irrevocably elect to measure the entire hybrid financial instrument at fair value through earnings (815-15-25-4), and if it cannot reliably identify and measure the embedded derivative it must measure the whole contract at fair value through earnings (815-15-25-53).

ASC 815-25 supplies the incremental accounting rules for fair value hedges that qualify under the designation criteria in ASC 815-20. The core mechanic (815-25-35-1) is that the gain or loss on the hedging instrument goes to current earnings, and the change in fair value of the hedged item attributable to the hedged risk adjusts the hedged item's carrying amount and also goes to current earnings, both presented in the same income statement line item as the hedged item's earnings effect; any mismatch therefore falls automatically into earnings. The Subtopic also governs basis adjustments and their amortization, portfolio layer method hedges of closed portfolios, interaction with impairment/credit loss rules, and mandatory or voluntary discontinuation of hedge accounting.

ASC 815-45 governs the accounting for weather derivatives that are not exchange-traded (exchange-traded weather derivatives fall under ASC 815-10), and excludes insurance contracts that pay only upon an insurable event causing a liability or adverse change in value of a specific asset or liability. If entered into for nontrading purposes, forward-based weather derivatives are accounted for under the intrinsic value method, purchased options are recorded as a premium asset amortized to expense plus intrinsic value measurement, and written options are recorded as a premium liability remeasured to fair value through earnings. All weather derivatives entered into for trading or speculative activities are recognized as assets or liabilities at fair value with subsequent changes in fair value in earnings.

ASC 820-10 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 (an exit price), and provides a single framework for measuring it plus related disclosures. Fair value is a market-based, not entity-specific, measurement, determined in the principal (or, absent one, most advantageous) market using assumptions market participants would use, maximizing observable and minimizing unobservable inputs. Inputs are categorized in a three-level hierarchy (Level 1 quoted prices, Level 2 other observable inputs, Level 3 unobservable inputs), with the whole measurement classified at the lowest level input significant to it.

This industry Subtopic supplements ASC 820 for brokers and dealers in securities. It lists non-exhaustive factors broker-dealers have considered in determining the fair value of a financial instrument (issuer's financial standing, market liquidity, restrictions on salability, pending offerings or reorganizations, dealer pricing, recent trades, etc.) and requires specific disclosure when an instrument is carried below its quoted price.

ASC 825-10 provides the overall guidance for financial instruments, containing two sets of rules: the fair value option (FVO), which lets any entity irrevocably elect, at specified election dates, to measure eligible financial assets, financial liabilities, firm commitments, and written loan commitments at fair value with changes in earnings; and incremental disclosures about the fair value of financial instruments, concentrations of credit risk, and market risk. The FVO is elected instrument by instrument, only for an entire instrument (not specific risks or cash flows), and is intended to mitigate earnings volatility from measuring related assets and liabilities differently without applying hedge accounting.

ASC 845-10 governs nonmonetary transactions — reciprocal exchanges of nonmonetary assets and nonreciprocal transfers of nonmonetary assets to owners or others. The default rule is that such transactions are measured at the fair value of the asset surrendered (or received, if more clearly evident) with gain or loss recognized (845-10-30-1), subject to three exceptions requiring carryover (recorded amount) accounting: fair value not determinable within reasonable limits, an exchange of product held for sale to facilitate sales to customers, or a transaction lacking commercial substance (845-10-30-3). Special subsections address purchases and sales of inventory with the same counterparty, barter credits, and exchanges involving boot.

ASC 845-985 formerly provided industry guidance on nonmonetary (barter) exchanges involving software, principally software revenue recognition in exchanges of software products or licenses. Every paragraph in this subtopic — scope, recognition, and implementation guidance — was superseded by ASU 2014-09 (Revenue from Contracts with Customers). The subtopic therefore contains no operative guidance; nonmonetary consideration in software arrangements is now addressed under ASC 606 (noncash consideration) and general nonmonetary guidance in ASC 845-10.

ASC 940-10 is the Overall subtopic of the Financial Services—Brokers and Dealers Topic, which lists the Topic's constituent subtopics (Broker-Dealer Activities, Receivables, Investments, Other Assets and Deferred Costs, Liabilities, Consolidation, and Fair Value Measurements) and sets its scope. The Topic applies to all entities that are brokers and dealers in securities and supplies only incremental industry-specific guidance; broker-dealers must still follow all other applicable GAAP outside the Topic.

ASC 944-80 governs how an insurance entity accounts for and presents separate accounts — pools of assets and liabilities maintained to fund variable annuity, variable life, pension and similar contracts where the contract holder generally bears the investment risk. If a separate account arrangement meets the four criteria in 944-80-25-2 (legal recognition, legal insulation from general account liabilities, contract-holder-directed investment, and full pass-through of investment performance), the contract holder portion is measured at fair value and reported as a single summary total asset with an equivalent summary total liability, with investment performance and amounts credited offset to zero. If any criterion fails (e.g., guaranteed interest or market value adjusted "spread" products), the assets and liabilities are accounted for and presented as ordinary general account items.

ASC 946-10 sets the scope of the Financial Services—Investment Companies Topic by defining which entities qualify as investment companies and therefore apply the Topic's specialized (fair value) accounting and reporting. Any entity regulated under the Investment Company Act of 1940 is automatically an investment company (946-10-15-4); all others must possess the two fundamental characteristics in 946-10-15-6 and are assessed against five typical characteristics in 946-10-15-7, applying judgment when a typical characteristic is absent. Status is determined at formation and reassessed only upon a change in purpose and design (or loss of 1940 Act regulation), with prescribed prospective or cumulative-effect accounting and disclosure for a change in status.

ASC 958-30 governs how a not-for-profit entity accounts for split-interest agreements—trusts or similar arrangements (charitable lead/remainder annuity trusts and unitrusts, charitable gift annuities, pooled income funds) in which the NFP shares the benefits of donated assets with other, usually non-charitable, beneficiaries. Revocable agreements are treated as intentions to give (assets recorded as a refundable advance); irrevocable agreements are recognized on execution at fair value, with contribution revenue equal to the assets received less the fair value of the obligation to other beneficiaries. When a third party holds the assets, the NFP instead recognizes a beneficial interest at fair value, and the liability side of period-certain, variable-payment agreements may contain a bifurcable embedded derivative under Topic 815.