A decade in the making, public companies now have a new standard to follow to tell them how to measure and recognize the value of financial assets and financial liabilities in financial statements.

Accounting Standards Update No. 2016-01 rewrites certain requirements under the Accounting Standards Codification for how to recognize, measure, and present financial instruments in financial statements, as well as the related disclosures. In a summary of the new standard, FASB says there are a handful of significant provisions that are of greatest concern to public companies. 

The new standard requires certain equity investments to be accounted for at fair value with changes recognized in net income, and it simplifies the impairment assessment of such investments when the fair value is not readily determinable. It eliminates certain disclosure requirements around instruments measured at amortized cost, and it requires companies to use exit pricing when measuring fair value for disclosure purposes.

FASB’s new rule requires certain liabilities measured at fair value under the fair value option to be reflected in other comprehensive income. It also requires separate presentation of instruments based on their form and the way they are measured, and it clarifies that companies must evaluate the need for a valuation allowance on a deferred tax asset related to certain securities.

“The new standard is intended to provide users of financial statements with more useful information on the recognition, measurement, presentation, and disclosure of financial instruments,” said Russ Golden, FASB chairman, in a statement. “It improves the accounting model to better meet the requirements of today’s complex economic environment.”

FASB describes the new standard as providing “targeted improvements to existing GAAP,” which is far different from the original proposal in 2010 that suggested companies should account for all financial assets and financial liabilities at fair value. FASB began working jointly with the International Accounting Standards Board more than a decade ago to write new rules for financial instrument accounting, well before the financial crisis of 2008 and 2009 put a spotlight on weaknesses in the existing rules.

Ultimately, FASB broke the project into three parts -- recognition and measurement, impairment, and hedging -- and withdrew significantly from its initial call for an all-fair-value approach. Still to come, FASB is expected to release its final rule on impairment in the first quarter of 2016, while an exposure draft on hedging is expected in the second quarter.

The new standard on recognition and measurement is effective for public companies in periods beginning after Dec. 15, 2017. Private companies, not-for-profit entities, and employee benefit plans will have an extra year to comply.