12. Inputs & Hierarchy

Question 1

Describe fair value measurement inputs.

Answer 1

Inputs can be observable or unobservable. Observable inputs are
based on market data from independent sources. Unobservable
inputs are the entity’s assumptions about the factors that impact
determination of fair value.

Question 2

What purpose does the fair value hierarchy

serve?

Answer 2

To prioritize the inputs to valuation techniques used to measure
fair value

Question 3

What are the three levels of the fair value

hierarchy and what does each consist of?

Answer 3

Level 1: highest level, are unadjusted quoted prices in active
markets for assets and liabilities identical to those being valued
Level 2: are observable for assets or liabilities, either directly or
indirectly, other than quoted prices described in Level 1 Level 3:
lowest level, are unobservable and used to determine fair value
only if observable inputs are not available