CFO.com in its October 10, 2008 article titled "Fair Value Guidance to Go Live" reported that 'The Financial Accounting Standards Board will likely issue final guidance on fair value accounting by Monday. The board is working today and perhaps over the weekend to tweak some of the language to clarify how assets in illiquid markets are valued.
FASB decided to rework two sections of the draft document that was put out for public comment one week ago - but stuck to its guns regarding mandating companies to use significant judgement when valuing financial assets in inactive markets.'
Further, CFO.com wrote that 'The guidance clarifies items contained in FAS 157, the accounting rule that governs how to measure assets and liabilities using the fair value method. FAS 157 provides a measurement hierarchy that outlines ways to value securities depending on how liquid they are. Regularly traded securities are valued on their selling price, whereas securities that are thinly traded or in illiquid markets have a different set of inputs. In practice, however, many experts suspect that banks and financial institutions gave undue weight to the last observable selling price of their securities before the markets froze completely.'
Read further in here : Fair Value Guidance to Go Live
FASB in the FASB Staff Position publication No. FAS 157-3 Determining the Fair Value of a Financial Asset When the Market for That Asset is not Active, in the Objective section stated that 'This FASB Staff Position (FSP) clarifies the application of FASB Statement No. 157, Fair Value Measurements, in a market that is not active and provides 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.
In the Background section, the FSP FAS 157-3 explained that 'The FASB staff obtained extensive input from various constituents, including financial statement users, preparers, and auditors, on determining fair value in accordance with Statement 157. Many of those constituents indicated that the fair value measurement framework in Statement 157 and related disclosures have improved the quality and transparency of financial information.
However, certain constituents expressed concerns that Statement 157 does not provide sufficient guidance on how to determine the fair value of financial assets when the market for that asset is not active.'
Read the complete guidance in here : FSP FAS 157-3