FASB 157

DEFINITION of 'FASB 157'

A Financial Accounting Standards Board (FASB) Statement that requires all publicly-traded companies in the U.S. to classify their assets based on the certainty with which fair values can be calculated. This statement created three asset categories: Level 1, Level 2 and Level 3. Level 1 assets are the easiest to value accurately based on standard market-based prices and Level 3 are the most difficult.

BREAKING DOWN 'FASB 157'

FASB 157 was passed to help investors and regulators understand how accurate a given company's asset estimates truly were. Many firms (including some of the largest in terms of assets) had to write down billions of dollars in hard-to-value Level 3 assets following the subprime meltdown and related credit crisis, which began in late 2006. By making companies report to investors the breakdown of assets, they allow investors to potentially see what percentage of the balance sheet could be open to revaluation or susceptible to sudden write-downs.

RELATED TERMS
  1. Financial Accounting Standards ...

    A seven-member independent board consisting of accounting professionals ...
  2. Level 1 Assets

    Assets that have readily observable prices, and therefore a reliable ...
  3. Level 3 Assets

    Assets whose fair value cannot be determined by using observable ...
  4. Level 2 Assets

    Assets that do not have regular market pricing, but whose fair ...
  5. Statement of Financial Accounting ...

    A formal document issued by the Financial Accounting Standards ...
  6. Accounting Changes And Error Correction

    Requirements for the accounting for and reporting of a change ...
Related Articles
  1. Personal Finance

    Assessing Bank Assets: Are Your Savings Safe?

    Learn how to determine if your assets are safe or if your bank has spread itself too thin.
  2. Markets

    Accounting Basics: Financial Reporting

    By Bob Schneider Generally Accepted Accounting Principles (GAAP)A key prerequisite for meaningful financial statements is that they be comparable to those for other companies, especially firms ...
  3. Investing

    Why Financial Statements Are Harder to Read Than Ever Before

    Understand four major reasons that financial statements published in 2016 are more complicated and difficult to read than they were in the past.
  4. Managing Wealth

    Asset Manager Ethics: Valuation Is A Tricky Business

    Asset managers must accurately represent all of a clients assets in the client portfolio. This can be tricky for unique and hard-to-value assets.
  5. Managing Wealth

    What's an Asset?

    An asset is a resource with economic value.
  6. Managing Wealth

    Investment Value Vs. Fair Market Value: How They Differ

    Learn about the differences between an asset's investment value and its fair market value, including why many think fair market value is unrealistic.
  7. Investing

    What are Financial Statement Assertions?

    Understand financial statement assertions and what they mean in accounting. For investors, it is important that assertions be accurate.
  8. Investing

    What are Financial Statements?

    Financial statements are a picture of a company’s financial health for a given period of time at a given point in time. The statements provide a collection of data about a company’s financial ...
  9. Investing

    12 Things You Need To Know About Financial Statements

    Discover how to keep score of companies to increase your chances of choosing a winner.
  10. Managing Wealth

    Explaining Assets Under Management

    Assets under management is a metric that measures the market value of assets that an investment company manages for investors.
RELATED FAQS
  1. How does the Financial Accounting Standards Board (FASB) establish accounting protocol?

    Find out how the Financial Accounting Standards Board or FASB, identifies possible financial reporting issues and determines ... Read Answer >>
  2. How is a deferred tax asset taxed?

    Find out how the IRS and FASB treat deferred tax assets, which a company can recognize in order to reduce its future tax ... Read Answer >>
  3. When and why were GAAP first established?

    Take a deeper look into the development and purpose of the generally accepted accounting principles, also known as GAAP, ... Read Answer >>
  4. How do investors and lenders benefit from financial accounting?

    Read about the benefits of financial accounting, including access to information and transparency between companies and their ... Read Answer >>
  5. Who is eligible to hold a deferred tax asset?

    Find out when U.S. companies are allowed to hold deferred tax assets and report them in the financial statements according ... Read Answer >>
  6. How does financial accounting help decision making?

    Read a brief overview of some areas where financial accounting helps in decision making for investors, lending institutions ... Read Answer >>
Hot Definitions
  1. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  2. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  3. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  4. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  5. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  6. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
Trading Center