FASB 157

A A A

DEFINITION

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.

INVESTOPEDIA EXPLAINS

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. Mark To Market - MTM

    1. A measure of the fair value of accounts that can change over time, such as ...
  2. Balance Sheet

    A financial statement that summarizes a company's assets, liabilities and shareholders' ...
  3. Off-Balance-Sheet Financing

    A form of financing in which large capital expenditures are kept off of a company's ...
  4. Earnings Per Share - EPS

    The portion of a company's profit allocated to each outstanding share of common ...
  5. Working Capital

    This ratio indicates whether a company has enough short term assets to cover ...
  6. Billing Cycle

    The interval of time during which bills are prepared for goods and services ...
  7. Amortization

    1. The paying off of debt in regular installments over a period of time. 2. ...
  8. Price-To-Cash-Flow Ratio

    The ratio of a stock’s price to its cash flow per share. The price-to-cash-flow ...
  9. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. ...
  10. Contra Liability Account

    A liability account that is debited in order to offset a credit to another liability ...
Related Articles
  1. Off-Balance-Sheet Entities: An Introduction
    Investing

    Off-Balance-Sheet Entities: An Introduction

  2. Common Clues Of Financial Statement ...
    Retirement

    Common Clues Of Financial Statement ...

  3. What is the difference between principles-based ...
    Retirement

    What is the difference between principles-based ...

  4. Accounting Rules Could Roil The Markets
    Bonds & Fixed Income

    Accounting Rules Could Roil The Markets

  5. Advanced Financial Statement Analysis
    Options & Futures

    Advanced Financial Statement Analysis

  6. Free On Board
    Professionals

    Free On Board

  7. Top 8 Ways Companies Cook The Books
    Personal Finance

    Top 8 Ways Companies Cook The Books

  8. An Introduction To The CMA Designation
    Professionals

    An Introduction To The CMA Designation

  9. How Return On Equity Can Help You Find ...
    Economics

    How Return On Equity Can Help You Find ...

  10. Top 4 Most Competitive Financial Careers
    Professionals

    Top 4 Most Competitive Financial Careers

comments powered by Disqus
Hot Definitions
  1. National Best Bid and Offer - NBBO

    A term applying to the SEC requirement that brokers must guarantee customers the best available ask price when they buy securities and the best available bid price when they sell securities.
  2. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin account. In the context of the NYSE and FINRA, after an investor has bought securities on margin, the minimum required level of margin is 25% of the total market value of the securities in the margin account.
  3. Leased Bank Guarantee

    A bank guarantee that is leased to a third party for a specific fee. The issuing bank will conduct due diligence on the creditworthiness of the customer looking to secure a bank guarantee, then lease a guarantee to that customer for a set amount of money and over a set period of time, typically less than two years.
  4. Degree Of Financial Leverage - DFL

    A ratio that measures the sensitivity of a company’s earnings per share (EPS) to fluctuations in its operating income, as a result of changes in its capital structure. Degree of Financial Leverage (DFL) measures the percentage change in EPS for a unit change in earnings before interest and taxes (EBIT).
  5. Jeff Bezos

    Self-made billionaire Jeff Bezos is famous for founding online retail giant Amazon.com.
  6. Re-fracking

    Re-fracking is the practice of returning to older wells that had been fracked in the recent past to capitalize on newer, more effective extraction technology. Re-fracking can be effective on especially tight oil deposits – where the shale products low yields – to extend their productivity.
Trading Center