FAR 2 - M3 Fair Value Measurements

Question 1

Fair value measurement

Answer 1

Fair value does not include transaction cost

If no principal market - get the fair value less transaction cost to see which has the most advantageous result

Fair value is an EXIT price (not an entrance price)

Question 2

Level 1 inputs to valuation techniques to measure FV

Answer 2

quoted prices in active markets for identical assets or liabilities
MOST reliable measure of fair value and should be used when available

Question 3

Level 2 inputs to valuation techniques to measure FV

Answer 3

inputs OTHER than quoted market prices (Level 1) that are directly or indirectly observable for the asset or liab

Question 4

Level 3 inputs to valuation techniques to measure FV

Answer 4

unobservable inputs for the asset or liab

Question 5

Level of hierarchy of FV measurement is determined by

Answer 5

the LOWEST level significant input

Question 6

What is the FV of a non-financial asset?

Answer 6

HIGHEST value and best use (ex farmland to plaza)