Chapter 1 - Conceptual Framework (4)

Question 1

Fair Value Measurement may be applied using the following approach:

Answer 1

1) Identify the asset or liability to be measured
2) Determine the principal or most advantageous market (highest and best use)
3) Determine the valuation premise (in-use or in-exchange)
4) Determine the appropriate valuation technique (market, income, or cost approach)
5) Obtain inputs for valuation (Level 1 - 3)
6) Calculate the fair value of the asset

Question 2

FASB C/F vs IASB Framework

Answer 2

FASB
10 elements: 
  3 basic elements:
    - Assets
    - Liabilities 
    - Equity
  3 elements of equity 
    - Contribution/ investments by owners
    - Distribution to owners
    - Comprehensive Income [DENT]
  4 elements of comprehensive income
    - Revenues
    - Expenses
    - Gains
    - Loses

= Net Income

IASB
5 elements of financial position
  3 elements of financial position:
    - Assets
    - Liabilities
    - Equity
2 elements of performance
    - Income
    - Expenses
       - Capital maintenance adjustments (Revaluation adjustments)

= Profit