FV Measurement

Question 1

FV does not take into consideration Transaction Cost

Answer 1

Only takes into consideration - Transportation cost

Question 2

Level 2 inputs are based on observable market data that include the following:

Answer 2

1. Quoted market prices for identical assets/liabilities in inactive markets
2. Quoted market prices for similar assets/liabilities in active markets
3. Interest rates at commonly quoted intervals

Question 3

Required disclosures include:

Answer 3

1. The valuation techniques applied (market, income or cost) including judgements and assumptions
2. The level of inputs that were applied in measuring FV
3. The uncertainty in the FV measurements as of the reporting date
4. The disposition of changes in Fair value (income or comprehensive income)

Question 4

• Eligible items can be valued at FV (if elected by the entity)
• Once FV option is elected, it is irrevocable (until subsequent election date)
• FV option elected on an instrument by instrument basis

Answer 4

True

Question 5

Market - Quoted price from stock exchange
Income - Discounted cash flow analysis
Cost - Current replacement cost (adjusted for obsolescence)

Answer 5

True

Question 6

Disclosures about FV measurements in periods subsequent to initial recognition are ___________

Answer 6

The FV hierarchy level within which FV measurements fall must be disclosed.

Quantitative FV measurement disclosures must be in tabular format.

Question 7

Valuation technique used in FV estimates

Answer 7

INCOME, COST AND MARKET

Question 8

Assumption used in FV measurement

Answer 8

The asset is in its highest and best use.

Question 9

Appropriate income approach for developing FV measurements:

Answer 9

Using PV techniques to discount cash flows

Question 10

The most _________ market is the one that maximizes the price received for the asset.

Answer 10

ADVANTAGEOUS

Question 11

PRINCIPAL MARKET

Answer 11

The market that has the greatest volume and level of activity for the asset.

Question 12

Exit price is not representative of FV when the item is sold under ______

Answer 12

duress

Question 13

The market approach valuation technique for measuring FV requires __________

Answer 13

prices and other relevant information of transactions from identical or comparable assets.

Question 14

The highest and best use is based on use of the asset by market participants, not by the _______________

Answer 14

reporting entity

Question 15

The FV option may be elected on an instrument by instrument basis for __________

Answer 15

AFS Securities

Question 16

Expected Cash Flows used to value a closely-held business

Answer 16

LEVEL 3, Expected cash flow is NOT an observable, external, market-based value, but rather is based on the entity’s assumptions as to cash flow.

Question 17

An entity’s 5 year sales estimate used to value a product line

Answer 17

LEVEL 3 - An entity’s 5 year sales estimate is not an observable, external, market-based value, but rather is based on the entity’s assumptions as to sales.