Fair Value

Question 1

Any fair value measurement should assume that the transaction to sell the asset or transfer the liability occurred in which market?

Answer 1

The principal market for the asset or liability.

Question 2

If there is no principal market to sell the asset or transfer the liability, what should be done to measure fair value?

Answer 2

The most advantageous market for the asset or liability should be used.

Question 3

What is the definition for principal market?

Answer 3

The market in which the reporting entity would sell the asset or transfer the liability with the greatest volume and level of activity for the asset or liability.

Question 4

What is the definition for most advantageous market?

Answer 4

The market in which the reporting entity would sell the asset or transfer the liability with the price that maximizes the amount that would be received for the asset or minimizes the amount that would be paid to transfer the liability, considering transaction costs in the respective markets.

Question 5

What kind of transaction costs should the price used to measure fair value be adjusted for?

Answer 5

The costs, if any, that would be incurred to transport the asset or liability to (or form) its principal (or most advantageous) market

Question 6

What phrase best describes a Level 1 input for measuring fair value of an asset or liability?

Answer 6

Unadjusted quoted prices for identical assets or liabilities in active markets