M6 - FV Measurements

Question 1

When the recoverability of a building’s carrying amount is determined to be impaired, the building’s fair value is best measured as the:

Answer 1

Price that would be received for this type of building based on observable inputs in its principal market.

Question 2

The three different valuation techniques used to measure fair value are:

Answer 2

1. Market
2. Income
3. Cost

Think “MIC” approaches

Question 3

Market Approach

Answer 3

Traded on an exchange, using prices and info from transactions involving identical or comparable A/L

Question 4

Income Approach

Answer 4

Converts future amounts, including CF and earnings to a single discounted amount (DCF)

Question 5

Cost Approach

Answer 5

Use current replacement cost

Question 6

What is a level 1 input?

Answer 6

Most reliable. Observable, active, identical

Question 7

What is a level 2 input?

Answer 7

Observable and quoted, active, comparable OR identical asset on a market that isn’t active

Question 8

What is a level 3 input?

Answer 8

Least reliable. Unobservable, based on assumptions, biased. ONLY used when L1 and L2 aren’t present

Need quantitative info bc its unobservable