The IASB has used the United States Financial Accounting Standards Board (FASB) accounting standard SFAS 157: Fair Value Measurements as the starting point for deliberations on its own fair value measurement project, which has included the release of a discussion paper on fair value measurement. The implications of these papers were discussed at the Institute's recent AIFRS Corporate discussion group held in Sydney. 
Developed to be a single source of guidance for fair value, SFAS 157 establishes a single definition of fair value, together with a framework for measuring fair value for financial reports prepared in accordance with accounting principles generally accepted by US GAAP. 
 
The major implications of SFAS 157 are considered to be:

• Exit price only – need to consider how this impacts on a market maker particularly with the need to recognise immediately the loss or gain up front
• Transfer of a liability rather than settling a liability
• Must use principal market, not necessarily one that will be used or that gives the best price
• Liabilities reflect the credit rating of the entity. Consider fair value option and effect when entity gets into financial trouble
• Consider best use of asset/liability, not current use
• Bid/offer price need not be used. Use rate within bid/offer that best represents fair value. Mid market may be allowed
• Transaction costs are not taken into account except for transportation costs to principal market
• No allowance for concentration risk (Blockage factor)