Employee Benefit Plan Publications

Assessing the Fair Values of Your Plan Investment

Considerations for Plan Management in Understanding How Fair Values Are Determined under FASB Statement No. 157, Fair Value Measurements

This document was prepared to assist you in implementing FASB Statement of Financial Accounting Standards No. 157, Fair Value Measurements (FAS 157).

FAS 157 is important to all plans required to prepare GAAP financial statements, regardless of whether you engage your auditor to perform a full scope or a limited scope audit. You will need to have the appropriate valuation processes in place and sufficient data to determine the fair value of the plan’s investments using the framework provided in FAS 157 and to present the disclosures about the use of fair value measurements required by FAS 157. The EBPAQC’s Getting Started: Applying New Accounting Rules for Measuring and Reporting Fair Value of Plan Investments: Considerations for Employee Benefit Plan Implementation of FASB Statement No. 157, Fair Value Measurements, can help you understand what steps you can take to start the process of implementing FAS 157.

Because a fair value measurement is for a particular asset or liability, one important responsibility you will have in implementing FAS 157 is determining the unit of account (i.e., what is being measured by reference to the level at which the investment is aggregated or disaggregated) for your investments. For example, the unit of account for a defined benefit plan’s derivative investment generally is the entire contract. The unit of account for a defined contribution plan’s investment in a self-directed brokerage account is the individual investment selected by the participants.

Following are suggested considerations that might be relevant as you assess the valuation of your plan’s investments.