When is it required?

FASB states in FAS 157, Fair Value Measurements, released in September 2006, that it “establishes a framework for measuring fair value…and expands disclosures [emphasis added] about fair value measurements.” When is this expanded disclosure required for environmental liabilities under FAS 157?

To answer, first we assemble some parts. Fair value measurements already are required for asset retirement obligations under FAS 143 and FIN 47. In 2009, fair value measurements will be required, as well, under FAS 141R for contingent liabilities, including loss contingencies, in mergers and acquisitions. Asset retirement obligations and loss contingencies are two main types of environmental liabilities for many companies.

FASB made FAS 157 effective for companies beginning this current year. It granted a one-year delay, however, for the application of FAS 157 to asset retirement obligations. This was to enable FASB “to consider the effect of various implementation issues,” according to proposed FASB staff position paper FSP FAS 157-b.

So, for asset retirement obligations and for loss contingencies associated with mergers and acquisitions, the “expanded disclosure” requirements of FAS 157 for fair value measurements apply beginning in 2009.

Specifically, they apply for financial statements for fiscal years beginning after November 15, 2008 for disclosure of asset retirement obligations. For disclosure of loss contingencies in mergers and acquisitions (business combinations) under FAS 141R, they apply when the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. FASB prohibits early application of FAS 141R.