01.04- Fair Value Flashcards
What are the six steps for Fair Value measurement?
1) Identify the asset or liability to be measured
2) Determine the principal or most advantageous market
3) Determine the valuation premise
4) Determine the appropriate valuation technique
5) Obtain inputs for valuation
6) Calculate the fair value of the asset
What four items are required to be recognized at fair value?
- Investments in marketable debt that are classified as TRADING SECURITIES or AVAILABLE FOR SALE
- Assets and liabilities when first recognized (but not in future periods)
- Impairment Losses
- Derivatives
Where are UNREALIZED GAINS OR LOSSES on TRADING SECURITIES recognized?
- Statement of Income
Where are UNREALIZED GAINS OR LOSSES on AVAILABLE FOR SALE recognized?
- Other Comprehensive Income
When is an IMPAIRMENT OF A RECEIVABLE recognized?
- When it is expected that some or all payment will not be received, or not be received on schedule.
- The fair value of the impairment would be the expected amount to be received.
What other two items are tested annually for IMPAIRMENT?
- Goodwill
- Intangibles
When are DEPRECIABLE ASSETS and AMORTIZABLE INTANIGIBLES evaluated for an adjustment to their FAIR VALUE?
When there is an indication that they have been impaired
Which DERIVATIVES are reported at FAIR VALUE?
ALL OF THEM
Where are UNREALIZED GAINS AND LOSSES reported for DERIVATIVES? What is the one exception to this rule? Where is that exception reported?
- Income
- Exception: Derivatives that are designed as cash flow hedges
- Reported in Other Comprehensive Income
Which four items are NEVER reported at FAIR VALUE?
- Pension plans and other retirement benefits
- Leases
- Financial instruments that are components of equity
- Share based payments and stock options
What three things are considered FINANCIAL INSTRUMENTS?
- Cash
- Ownership Interest
- A contract that imposes an obligation to receive another financial instrument
Which two examples of FINANCIAL ASSETS AND LIABILITIES would qualify for the FAIR VALUE ELECTION?
- Most investments
- Firm commitments involving financial instruments
Where would UNREALIZED GAINS OR LOSSES for AVAILABLE FOR SALE SECURITIES be reported at FAIR VALUE?
- Income Statement
Where would UNREALIZED GAINS OR LOSSES for HELD TO MATURITY SECURITIES be reported at FAIR VALUE?
- Income
Where would UNREALIZED GAINS OR LOSSES for INVESTMENTS accounted for under the EQUITY METHOD be reported at FAIR VALUE?
- Income
