Presentation is loading. Please wait.

Presentation is loading. Please wait.

ASC 820 (FAS 157) Fair Value Disclosures Acct 414.

Similar presentations


Presentation on theme: "ASC 820 (FAS 157) Fair Value Disclosures Acct 414."— Presentation transcript:

1 ASC 820 (FAS 157) Fair Value Disclosures Acct 414

2

3

4 Materials & Labor Markets Manu- facturer Wholesale Market Dealer Retail Market Consumer 2 nd Hand Market FASBs Solution: highest and best use

5 THE ASSET OR LIABILITY Indicated Value Unit of Valuation Market Participant Assumptions Fair Value Measurement F/S Presentation and Disclosure Inputs to Valuation Techniques Attribute Value to Asset or Liability at Unit of Account Level Highest and Best Use Exit Market Valuation Premise Unit of Account Unit of Valuation

6 First Choice: Principal market is the market with the greatest volume and level of activity for asset or liability If there is no principal market : Most advantageous market maximizes the amount that would be received for the asset or minimizes the amount that would be paid to transfer the liability, considering transaction costs The market in which the ENTITY would sell the asset or transfer the liability Market Participant Assumptions Highest and Best Use Exit Market Valuation Premise

7 Market participants are buyers and sellers in the exit market (other entities with whom the entity would transact) A fair value measurement should be determined based on the assumptions market participants would use in pricing the asset or liability, including assumptions about (measurement) risk, highest and best use (if asset), and nonperformance risk (if liability) Market Participant Assumptions Highest and Best Use Exit Market Valuation Premise

8 Market Participant Assumptions Highest and Best Use Exit Market Valuation Premise In-use or in-exchange Use by market participants that maximizes value of asset (or asset group) The unit of valuation depends on the highest and best use of the asset, which establishes the valuation premise used to measure the fair value of the asset

9 THE ASSET OR LIABILITY Indicated Value Unit of Valuation Market Participant Assumptions Fair Value Measurement F/S Presentation and Disclosure Inputs to Valuation Techniques Attribute Value to Asset or Liability at Unit of Account Level Highest and Best Use Exit Market Valuation Premise Unit of Account Unit of Valuation

10

11 A fair value measurement should maximize the use of observable inputs From: Refining Fair Value Measurement, Miller, Paul B. W.; Bahnson, Paul R.. Journal of Accountancy, Nov2007, Vol. 204 Issue 5, p30-36,

12 Level 1Quoted prices in active markets for identical assets/ liabilities (unadjusted); no blockage factors (Price x Quantity) Level 2Other observable inputsinclude quoted prices for similar assets/ liabilities (adjusted) and market-corroborated inputs Level 3Unobservable inputsentitys own assumptions about market participant assumptions, including assumptions about risk, developed based on the best information available in the circumstances (subject to cost-benefit constraint); might include the entitys own data

13 Fair Value Measurement F/S Presentation and Disclosure THE ASSET OR LIABILITY Indicated Value Unit of Valuation Market Participant Assumptions Inputs to Valuation Techniques Attribute Value to Asset or Liability at Unit of Account Level Highest and Best Use Exit Market Valuation Premise Unit of Account Unit of Valuation

14

15

16

17

18

19

20 $1,000 face value * (approximation) = $ fair value

21

22


Download ppt "ASC 820 (FAS 157) Fair Value Disclosures Acct 414."

Similar presentations


Ads by Google