F2 M6

Question 1

what if there is no principal market?

Answer 1

choose the most advantageous market at its fair value, not the best price after transaction costs. That only tells you what gives you more money

Question 2

what is the most advantageous market?

Answer 2

the best price after transaction costs

Question 3

what is fair value?

Answer 3

the price received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in principal market

Question 4

companies can elect to use fair value on an:

Answer 4

instrument by instrument basis. But once elected, fair value measurement will be used until the asset and liability are disposed

Question 5

does fair value include transaction costs?

Answer 5

No

Question 6

what is the principal market?

Answer 6

the market with the greatest volume or level of activity for asset or liability to determine fair value

Question 7

what are market participants?

Answer 7

buyers and sellers acting in their own economic best interests who are independent, knowledgeable about an asset or liability, and willing to transact for asset or liability

Question 8

what is the market approach?

Answer 8

uses prices and other relevant data from market transactions involving identical or comparable assets and liabilities to measure fair value

Question 9

what is the income approach?

Answer 9

converts future amts, including cash flows or earnings, to single discounted amt to measure fair value

Question 10

what is the cost approach?

Answer 10

uses current replacement cost to measure fair value of assets

Question 11

the most appropriate fair value to use for an equity investment is?

Answer 11

a quoted price for an identical asset if available

Question 12

fair value of a nonfinancial asset?

Answer 12

using the asset’s highest and best use or by selling it to another market participant that would be its highest and best use

Question 13

what is level 1 valuation?

Answer 13

quoted price in an active market for identical asset or liability

Question 14

what is level 2 valuation?

Answer 14

quoted prices for similar assets or liabilities in an active market

Question 15

what is level 3 valuation?

Answer 15

unobservable inputs for the asset or liability, reflect entity’s own assumptions that a market participant would use

Question 16

how are quoted prices for identical assets and liabilities in markets that are not active treated?

Answer 16

as a level 2 observable input