F2- M4 - Fair Value Measurements

Question 1

________ is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal (or most advantageous) market at the measurement date under current market conditions.

Answer 1

Fair value

Question 2

The ____________-is the market with the best price for the asset (maximizes selling pricing of asset) or liability (minimizes payment to transfer liability), after considering transaction costs.

Answer 2

most advantageous market

Question 3

What are the three approaches an entity can use for measuring fair value (3)

Answer 3

MIC - Market approach, Income Approach or Cost Approach

Question 4

What is the fair value hierarchy prioritizes the inputs used int he market by

Answer 4

Level 1 (highest, Level 2, and Level 3 being the lowest

Question 5

Fair Value is the _______ price

Answer 5

Exit price

Question 6

The objective of fair value disclosures is to provide users of financial statements with information about assets and liabilities measured at fair value, including:

Answer 6

1) Valuation techniques and inputs to arrive at fV. 2) uncertainty in fair value measurements as the reporting date 3) how changes in FV affect the entity’s performance and cash flows

Question 7

The entity is exempt from the fair value measurement requirement when:

Answer 7

1) not practical to measure fV, 2) Fair value cannot be reasonably determined or FV cannot be measured with sufficient reliability

Question 8

Fair value does not include _____ cost but may include transportation costs

Answer 8

Transaction cost

Question 9

The principal market is the market with the ______ volume or _______ or the asset

Answer 9

Highest volume or level of activity

Question 10

For the most advantageous market, if no principal market exist, its the market with

Answer 10

the best price for the assets after considering transaction costs ( Price - Transaction cost) -> Select the price not including transaction cost

Question 11

Highest and Best use is used instead of FV when its either

Answer 11

Non-financial asset - PP&E or Liabilities and Financial Assets - Stocks and Bonds

Question 12

______ uses prices and other relevant information from market transactions (exchange)

Answer 12

Market

Question 13

_______ converts future amounts including cash flows or earnings to a single discount amount to measure fair value

Answer 13

Income

Question 14

________ uses current replacement cost to measure fair value

Answer 14

Cost

Question 15

Level ______ is quoted prices in “active” markets for “identical” assets or liabilities

Answer 15

1

Question 16

Level ______ is directly or indirectly observable (quotes prices for similar assets in active markets) or Quoted prices for identical assets in inactive

Answer 16

2

Question 17

Level ______ unobservable inputs used only when you dont have level 1 or 2

Answer 17

3