Fair Value Framework- Introduction and Definitions

Question 1

Are there significant differences between IFRS and US GAAP related to fair value?

Answer 1

-No

Question 2

What is fair value? How is it measured?

Answer 2

• Price received to sell an asset or paid to transfer a liability
• As an exit price, not an entry price

Question 3

Is fair value a market based measurement or an entity specific measurement?

Answer 3

-Market based

Question 4

Do we take transaction and transportation costs in determining fair value? How about in determining the most advantageous market for the asset/liability?

Answer 4

• Transaction no, transportation yes

- Both yes

Question 5

If intended use of NONFINANCIAL asset different from highest and best use by market participants, which is used in determination of FV?

Answer 5

-Market participants

Question 6

Should entity’s credit risk affect fair value of liability? How about third party credit enhancements?

Answer 6

• Yes

- No

Question 7

What are the exceptions for ASC 820 related to fair value?

Answer 7

Accounting principles related to:

 - Share based payment transactions
 - Using vendor specific objectives
 - Inventory pricing
 - Lease classification or measurement