New Valuation Standards May Affect Transparency and Fees

The Financial Accounting Standards Board (“FASB”) recently reaffirmed that companies, including investment managers, would be required to implement Statement 157, Fair Value Measurements (“FAS 157”), with respect to the valuation of financial assets and liabilities in fiscal years beginning after November 15, 2007. Compliance with FAS 157 may result in lower asset valuations and, therefore, lower fees for investment managers who are compensated based on the value of the assets they manage.

What is required by FAS 157?

FAS 157 is intended to make fair value measurements more meaningful and more easily comparable by replacing the various definitions of fair value and dispersed guidance regarding their application with a single definition and set of guidelines, as well as by requiring additional disclosure. FAS 157 does not expand the situations where fair value measurements are to be used, but instead changes the way fair value is determined in those cases where fair value measurements are already required. read more…

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