Fair Value Estimation Flashcards
What is the best evidence of fair value?
Published price quotations in an active market
What is meant by the term “observable inputs”?
Assumptions that market participants would use in pricing an asset or liability based on market data from sources independent of the reporting entity
What is the auditor’s basic responsibility regarding fair value measurement and disclosures?
The auditor must obtain sufficient appropriate audit evidence to provide reasonable assurance that fair value measurements and disclosures comply with generally accepted accounting procedures. The auditor should also determine that the methods used to determine fair value are consistently and appropriately applied.
Define “fair value.”
The amount at which the asset could be bought or sold in a current transaction between willing parties, that is, other than in a forced or liquidation sale
What is meant by the term “unobservable inputs”?
An entity’s own judgments about what assumptions market participants would use (Estimation uncertainty increases when the fair value estimates are based on unobservable inputs instead of observable inputs.)
