SEC's Atkins Calls for Fair-Value Guidance
The commissioner thinks companies may need help in estimating values when there are no yardsticks to measure them.

April 25, 2008

In his interview with Reuters, Atkins suggested that issuers needed more help in estimating Level 3–type values. "Something is clearly not worth zero. It's worth something, so what do you benchmark it to? Between us and the accounting firms and the investment banks...we need to come up with some good guidance for people," he said.

Three levels of fair-value estimates in a descending order based on the relative amounts of market information available:

in Level 1, an asset or liability can be valued based on a quoted price in an active market;

in Level 2, it can be valued based on information other than quoted prices but with "observable market data"; and

in Level 3, it can be valued only through "unobservable inputs" and the best available information under the circumstances.



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