Case 11-2(b)
Fair Value Disclosures
Case 11-2(b) is an extension of Case 11-2(a). For this case, assume that the Case 11-2(a) facts remain, with the exception of the additional assumptions listed below for each security. As stated in Case 11-2(a), Family Finance Co. (FFC) accounts for its investments at fair value, with changes in fair value reflected either in earnings (for trading securities) or other comprehensive income (OCI) (for available-for-sale (AFS) securities). 1 Because FFC uses the interest rate swap in a cash-flow hedge, FFC measures the derivative at fair value, presenting the portion of the fair value change that effectively offsets cash flow variability on its corporate debt in OCI and the remainder in earnings.
Use blank table formats 1a and 1b below to complete the required quantitative disclosures. (Note that participants are also required to identify the classes of assets and liabilities to include in Tables 1a and 1b.) o For assets and liabilities measured at fair value by means of significant unobservable inputs on a recurring basis, a reconciliation of the beginning and ending balances (i.e., annual table) separately for each class of assets and liabilities, including where the gains or losses included in earnings are reported in the income statement. Use blank table format 2 below to complete the required quantitative disclosures. (Note that participants are also required to identify the classes of assets and liabilities to include in Table 2.) o For certain assets and liabilities measured at fair value, (1) the amount of the total gains or losses for the period included in earnings that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held as of the reporting date (i.e., December 31,
2012) and (2) a description of where those unrealized gains or losses are reported in the income statement. Use blank table format 2 below to complete the required quantitative disclosures. o For assets and liabilities measured at fair value by means of significant unobservable inputs, quantitative information about the significant