week 2 becker_Fair_Value_Measurement - Financial 10 Becker...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Becker Professional Education | CPA Exam Review Financial 10 © DeVry/Becker Educational Development Corp. All rights reserved. F10- 3 F A I R V A L U E M E A S U R E M E N T I. OVERVIEW U.S. GAAP and IFRS have standardized the definition of fair value, established a framework for measuring fair value, and outlined required fair value disclosures for all areas that require or permit fair value measurement, except: A. Share-based compensation, B. Measurements based on or using vendor-specific objective evidence of fair value, and C. Fair value measurements used for lease classification or measurement. II. TERMINOLOGY A. Fair Value Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal (or most advantageous) market at the measurement date under current market conditions. 1. Fair value is measured for a specific asset or liability, a group of assets and/or liabilities, or an entity's own equity instrument (e.g. an equity interest issued as consideration in a business combination). 2. Fair value is a market-based measure, not an entity-based measure. 3. Fair value is measured in the principal market for the asset or liability, or the most advantageous market in the absence of a principal market. 4. Fair value is an exit price (the price to sell an asset or transfer a liability), not an entrance price (the price to acquire an asset or assume a liability). 5. A fair value measure should reflect all of the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. 6. Fair value does not include transaction costs, but may include transportation costs if location is an attribute of the asset or liability. 7. The fair value of a nonfinancial asset assumes the highest and best use of the asset. 8. The fair value of a liability should include the liability's nonperformance risk, which is the risk that the obligation will not be fulfilled. 9. The fair value of an entity's own equity instrument should be measured from the perspective of a market participant who holds that instrument as an asset.
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

0/0 PREVIEWS LEFT
Sign up to access 24/7 study resources for your classes

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern