Chapter 2: Fair Value for Financial Reporting Based on FASB ASC 820 Flashcards
Per FASB ASC 820 is fair value a market-based measurement or an entity-specific measurement?
Market-based measurement
ASC 820 valuation is based on who’s perspective?
market participants
If you cannot observe something in the market to value it what do you use?
Market based inputs
Should you include the intention to hold an asset or to settle a liability in calculating fair value?
No
What is excluded from ASC 820?
share-based payment transaction (ASC 718)
Does fair value consider Entry price?
No
Can you use related party-transactions in determining fair value?
Yes, if there market terms were used
4 things market participants must be?
- Independent
- Knowledgeable
- Able
- Willing
The market with the greatest volume and level of activity for an asset or liability?
Principal Market
The market that maximizes the amount that would be received to sell the asset or minimizes the that would be paid to transfer the liability, after taking into account transaction costs and transportation costs.
Most Advantageous Market
Do you have to use the principal market over the most advantageous market?
Yes
Does the reporting entity have to have access to the principal market in order to use the principal market value?
Yes
How does the valuation analyst determine market participates if no specific market participants are needed to be identified?
Identify the attributes of the market participants (strategic acquire, financial buyer, etc)
You should not adjust the price in calculating fair value for transaction cost (T/F)
True
Would a reporting entity determine value based on it’s perceived use or a market participants?
Market Participant
