Definition of FAS 157

FAS 157, or Financial Accounting Standard (FAS) 157, was the original name for Topic 820 – the fair value standard which became effective in late 2007. Also known as the ‘mark-to-market rule,’ it requires funds to fair value securities rather than rely on historical prices to value securities.
 
The standard mandates that firms rank securities on a scale of 1 to 3, with “1” being those securities with the most easily identifiable prices and “3” being the least transparent and most difficult to price. Those securities labeled a “2” have prices that are not directly observable and need to be compared to similar assets with prices that can be observed. [1]

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