F2 M4 Fair Value Measurements Flashcards
Which of the following is true regarding fair value? Pick all that apply.
- The fair value of an asset or liability is specific to the entity making the fair value measurement.
- Fair value is the price to acquire an asset or assume a liability.
- Fair value includes transportation costs, but not transaction costs.
- The price in the principal market for an asset or liability will be the fair value measurement.
3 & 4
Which level of inputs are the most reliable?
Level 1
Level 1 measurements are ____ in active markets for _____ assets or liabilities.
Quoted prices in active markets for identical assets or liabilities (identical, not similar)
When there is no principal market, the fair value in the _____ is the fair value measurement (consider transaction costs in determining this but not in calculating fair value)
Most advantageous, although transaction costs are not included in the fair value measurement, they are used to determine the most advantageous market
A change in the valuation technique used to measure fair value is a change in _____
Accounting estimate
Level 2 measurements include using assets of _____ value.
Similar value
Fair value of an asset is the price that would be _____ if you were to ____ the asset.
Received if you were to sell the asset
Fair value of a liability is the price that would be ____ when _____ a liability.
Paid when transferring a liability
Level 1, 2, or 3 inputs:
Internally generated cash flow projections for a related asset or liability
Level 3
Level 1, 2, or 3 inputs:
Interest rates that are observable at commonly quoted intervals
Level 2
Level 1, 2, or 3 inputs:
Quoted prices for identical assets and liabilities in markets that are not active
Level 2
Level 1, 2, or 3 inputs:
Unadjusted quoted prices for identical assets or liabilities in active markets
Level 1
The principal market is the _____.
Market with the greatest volume of activity for the particular asset for which fair value is being determined
The most advantageous market is the _____.
The market offering the best price after subtracting transaction costs.
Which level of inputs includes unobservable input which reflects the reporting entity’s assumptions.
Level 3
