FASB issued an Accounting Standards Update (ASU) that improves
financial reporting for investors and other financial statement users
by increasing the comparability of financial information across
reporting entities that have investments in equity securities measured
at fair value that are subject to contractual restrictions preventing
the sale of those securities.

FASB ASC Topic 820, Fair Value Measurement, according to a news
release, says that when measuring the fair value of an asset or a
liability, a reporting entity should consider the characteristics of
the asset or liability, including restrictions on the sale of the
asset or liability, if a market participant also would take those
characteristics into account. The key to that determination is the
unit of account for the asset or liability being measured at fair
value.

Some stakeholders said that Topic 820 contained conflicting guidance
on what the unit of account is when measuring the fair value of equity
security. This has resulted in diversity in practice on whether the
effects of a contractual restriction that prohibits the sale of equity
security should be considered in measuring that equity security’s fair
value.

To address this, the amendments in the ASU clarify that a contractual
restriction on the sale of equity security is not considered part of
the unit of account of the equity security and, therefore, is not
considered in measuring fair value. The ASU introduces new disclosure
requirements to provide investors with information about the
restriction, including the nature and remaining duration of the
restriction.

For public business entities, the amendments in the ASU are effective
for fiscal years beginning after Dec. 15, 2023, and interim periods
within those fiscal years. For all other entities, the amendments are
effective for fiscal years beginning after Dec. 15, 2024.