Engagement teams should bear in mind the following expectations that the SEC has iterated in various releases:

Registrants should have a systematic methodology that involves documenting the factors that the registrant considered when making quarterly and year end determinations. Such a methodology should ensure that all available evidence concerning the decline in a security’s fair value below amortized cost will be identified and evaluated in a disciplined manner. A registrant should document the specific rationale and objective evidence supporting the carrying amounts of securities that have experienced fair-value declines below amortized cost. The documentation should justify the registrant's carrying amounts, make the financial statements easier to audit, and serve as a basis for future determinations. In addition, there should be documentation of the company’s reason for sales of securities at a realized loss when the company had previously asserted that an impairment was not other-than-temporary. The need for a systematic methodology and adequate documentation was recently reiterated in SAB 102 (SAB Topic 6.L), Selected Loan Loss Allowance Methodology and Documentation Issues. Although SAB 102’s guidance addresses loans, the methodology and documentation issues that it discusses apply to all valuations.