Fair Value Framework (Mol. 3)

Question 1

What values are relevant to the amounts that should be reported in the consolidated financial statements.

Answer 1

The prior carrying values

Question 2

What values should be record on its books?

Answer 2

the appropriately determined fair value at the date of the transaction.

Question 3

When is the cost approach used?

Answer 3

When fair value is determined as the amount that currently would be required to replace the service capacity of an asset (i.e., current replacement cost)

Question 4

When is the income approach used?

Answer 4

The income approach converts future amounts (e.g., of cash flows) to a current present value to determine fair value.

Question 5

When is the market approach used?

Answer 5

The market approach uses prices and other relevant information generated by market transactions involving items that are identical or comparable to those being valued in determining fair value.