What disclosures are required for the fair value hierarchy?

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AcadiFi · Accepted Answer

Disclosures scale with the level of subjectivity. Required items:

**All levels** — fair value amount at reporting date, level classification, valuation technique (market, income, or cost approach), description of inputs used, any changes in technique from prior period with reason.

**Level 2 and 3 additions** — inputs used beyond quoted prices (yield curves, volatility, credit spreads).

**Level 3 enhanced disclosures** — (1) Rollforward: beginning balance + purchases + sales + issuances + settlements + transfers in/out + unrealized gains in P&L + unrealized gains in OCI = ending balance. (2) Quantitative disclosure of significant unobservable inputs — e.g., 'WACC range 9.2% to 14.8%, weighted average 11.6%'. (3) Sensitivity analysis — qualitative for IFRS 13, quantitative for financial institutions. (4) Valuation process description including governance and who reviews estimates.

**Recurring vs non-recurring** — disclose separately.

**Transfers** — reason and policy for recognizing transfers (beginning of period vs date of event).

Worked example: Ardent Meridian Holdings' 10-K footnote shows Level 3 assets at $412M (private equity fund interests). Required disclosure: opening $387M + purchases $45M − sales $21M + unrealized gains in earnings $1M = closing $412M, plus sensitivity saying 'a 100bps increase in discount rate would decrease fair value by $18M'.

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What disclosures are required for the fair value hierarchy?

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