* More would be revealed on illiquid Level 3 assets
* FASB eyes more transparency for investors

NEW YORK - U.S. accounting rulemakers have proposed requiring new disclosures on how companies value illiquid assets, a move designed to make it easier for investors to assess businesses' financial health.

The rules proposed by the Financial Accounting Standards Board would require a company to provide alternative means to calculate how much its hardest-to-value assets are worth, using reasonably possible scenarios.

Robert Herz, FASB's chairman, in a statement said the proposed disclosures would result in increased transparency for investors.

U.S. rules for fair value accounting divide assets into three categories: Level 1, Level 2 and Level 3.

The value of a Level 1 asset can typically be determined from market prices. A Level 2 asset is often valued based on prices for similar assets, sometimes known as mark-to-model. A Level 3 asset is considered illiquid, and often valued based on complex mathematical models.

FASB's proposal would require a company to show how its valuation of a Level 3 asset would increase or decrease in the event of a reasonably possible market scenario.

It would also require a company to disclosure the amounts of major transfers of assets in or out of Level 1 and Level 2, and the reasons for those transfers.

FASB said the deadline for comments on its proposed update is Oct. 12. (Reporting by Jonathan Stempel; editing by John Wallace)