Fair Value Measurements

Question 1

Name the valuation techniques appropriate for measuring the fair value of an asset?

Answer 1

1. Market approach - using pricing and relevant information from market transaction involving similar assets and liabilities
2. Income approach - discounts expected future cash flows to a single present amount
3. Cost approach - replacement cost

Question 2

What is meant by an assets most advantageous market?

Answer 2

An assets most advantageous market is the market that maximizes the amount received if an asset is sold if the asset does not have a principle market

To compute the most advantageous market, subtract any transaction costs from the market price for each scenario and select the price that maximized the amount received. Transaction costs are ignored for valuation purposes