FAR 2.3 - Fair Value Measurements

Question 1

The price that would be received t sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principle market at the measurement ate under current market conditions:

Answer 1

Fair value

Question 2

Does fair value include the transaction cost or transportation cost?

Answer 2

Does not include transacation cost
May include transportation cost if location is an attribute of the asset or liability

Question 3

The market with the greatest volume or level of activity:

Answer 3

Principle market

Question 4

The market with the best price for the asset or liability after considering transaction cost:

Answer 4

Most advantageous market

Question 5

What are the 3 valuation techniques entities can use to measure fair value?

Answer 5

1. Market approach
2. Income approach
3. Cost approach

Question 6

Uses prices and other relevant information from market transactions involving identiaaal or comparable assets or liabilities to measure fair value:

Answer 6

Market approach

Question 7

Converts future amounts, including cash flows or earnings, to a single discounted amount to measure fair value:

Answer 7

Income approach

Question 8

Uses current replacement cot to measure the fair value of assets

Answer 8

Cost approach

Question 9

Prioritizes the inputs that can be used in the valuation techniques

Answer 9

Fair value hierarchy

Question 10

Quoted prices in active markets for identical assets or liabilities that the reporting entity has access to on the measurement date

Answer 10

Level 1 inputs

Question 11

Quoted prices or similar a assets or liabilities in active markets.
Quoted prices for identical or similar assets in markets that are not active

Answer 11

Level 2 inputs

Question 12

Unobservable inputs for the asset or liability. Reflect the reporting entity’s assumptions and should be based on best available information.

Answer 12

Level 3 inputs