FAR Fair Value Measurements

Question 1

What is Fair Market Value

Answer 1

The price that would be received to sell an asset or paid to transfer a liability in an ORDERLY transaction b:w mkt participants in the principal market at the measurement date.

Question 2

3 input to valuation techniques for Fair Value (FV) measurement

Answer 2

1. Quoted market prices on the Stock exchange for an identical asset in an active market
2. Similar asset in an active market or identical asset in an inactive market
3. Unobservable input for the assets based on management’s own judgment.

Question 3

What are the 03 approaches to measuring FV?

Answer 3

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

Question 4

What is the principal market between various market that is actively trading a particular asset?

Answer 4

It is the market with the greatest volume of activity for the particular asset for which fair value is being determined.

Question 5

Difference b/n USGAAP and IFRS in the valuation of PP&E

Answer 5

US GAAP uses only the cost approach ie Historical cost b/c it is verifiable
IFRS uses both the Cost approach and the revaluation approach.