The Financial Accounting Standards Board (FASB) on Wednesday issued a proposed update to its fair value measurement standard that seeks to clarify conflicting guidance regarding equity securities.

The amendment to Topic 820 would affect all entities with investments in equity securities measured at fair value and subject to contractual restrictions preventing their sale. Its effective date will be determined following feedback considered from a comment period ending Nov. 14.

The standard as currently worded has led to “diversity in practice on whether the effects of a contractual restriction that prohibits the sale of an equity security should be considered in measuring that equity security’s fair value,” FASB explained. “Some stakeholders apply a discount to the price of an identical equity security that is not subject to a contractual sale restriction, whereas other stakeholders consider the application of a discount to be inappropriate under the principles of Topic 820.”

The proposal would clarify that a contractual restriction on the sale of an equity security should not be considered in measuring fair value. The amendment would not change the principles of fair value measurement and seeks to improve GAAP by “reducing diversity in practice, reducing the cost and complexity in measuring fair value, and increasing comparability of financial information across reporting entities that hold those investments,” FASB stated.