Fair Value measurement

Question 1

Fair value is not…

Answer 1

adjusted for transaction costs
but is for transportation costs

Question 2

Fair value is defined as…

Answer 2

the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Question 3

principal market =

Answer 3

market with the greatest volume and level of activity

Question 4

Most advantageous market =

Answer 4

Market that would maximise the amount received/paid after deduction of transaction and transportation costs

Question 5

Key criteria market participants

Answer 5

• Independent
• Knowledgeable
• Able and willing

Question 6

Fair value hierarchy

Answer 6

Level 1: Quoted prices … in active markets for identical assets or liabilities
Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indectly
Level 3: unobservable inputs for the asset or liabilities