related parties the standard does allow the price in a related party

Related parties the standard does allow the price in

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related parties, the standard does allow the price in a related party transaction to be used as an input in a fair value measurement provided the entity has evidence the transaction was entered into at market terms; - They are knowledgeable, having a reasonable understanding about the asset or liability using all available information; - They are able and willing to enter into a transaction for the asset or liability. No need to identify specific market participants, focus on characteristics of participants.
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3.3.4. What are the appropriate valuation techniques for the measurement? 3 Possible valuation approaches: 1. Income approach = Based on future amounts (e.g. cash flows or income and expenses) that are converted (discounted) to a single present amount. The fair value is based upon market expectations about future cash flows, or income and expenses associated with that asset. Present value techniques are an example of techniques used in applying the income approach. The fair value of an asset is then not based on an observed market price but rather is generated by discounting the expected earnings from the use of the asset by a market participant; 2. Market approach = based on market transactions involving identical or similar assets or liabilities; 3. Cost approach = based on the amount required to replace the service capacity of an asset (often referred to as current replacement cost). This may involve consideration of the amount to be paid for a new asset, with this amount then adjusted for both physical deterioration and technological obsolescence. 3.3.5 Which inputs should be used when measuring fair value? The assumptions that market participants would use when pricing the asset or liability, including assumptions about risk, such as the following: - The risk inherent in a particular valuation technique used to measure fair value (such as a pricing model); - The risk inherent in the inputs to the valuation technique. Observable inputs = Inputs that are developed using market data, such as publicly available information about actual events or transactions, and reflect the assumptions that market participants would use when pricing the asset or liability. Unobservable inputs = Inputs for which market data are not available and that are developed using the best information available about the assumptions that market participants would use when pricing the asset or liability. Regardless of the selected valuation technique, the inputs an entity uses must be consistent with the characteristics of the asset or liability that market participants would take into account. In addition, inputs exclude premiums or discounts that reflect size as a characteristic of the entity's holding, as these are not a characteristic of the item being measured, and any other premiums or discounts that are inconsistent with the unit of account.
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