If the FV of a non-financial asset is the value of its highest and best use
The highest bidding price for non-financial asset
Change from the cost approach to the market approach of measuring FV is
A change in accounting estimate
To solve the ‘most advantageous’ market is the
Market offering the best price after subtracting transaction costs
The statements regarding the FV is
FV includes transportation cost bu not transaction costs and the price in the principle market for an asset or liability will be the FV measurement
When developing the FV assumptions,
An entity does not need to identify specific market participants
Level 1 =
Level 2 =
Level 3 =
*Quoted for identical assets in active markets (most reliable)
*Inputs for similar assets or other observable inputs
*Unobervable inputs, including management assumptions (least reliable but acceptable)
**The hierarchy level is based on the lowest level sinificant input, not the highest
To solve for principle market is finding the market with the
Greatest volume or level of activity for the asset in
Quoted market prices on a stock exchange for IDENTICAL assets are considered
To be level 1input, most reliable
Internally generated cash flow projections for a related asset or liability would be
Better classified as a level 3 input
*These considered unobservable inputs
FV is measured for a specific
Asset/liability or group of assets/liabilities
FV is a
Market based measure, not a entity based measure
*Company may apply FV to financial instrument on an instrument-by-instrument basis, but once elected, FV measurement will be used until the asset/liability is disposed
When finding the FV of a recoverable buildings carrying amount is determined to be impaired
The price that would be recieved for this type of building based on observable inputs in its principle market
*To find the FV for an impaired building is best to measure by the observable market price in the principle market
Market participants are
Buyers and sellers acting in their economic best interest who are independent (not related parties), who are knowledgeable about asset or liability, and are willing and able for that asset or liability
*a company purchases real estate zoned for recreational use is an example
The market approach determines
FV by using prices and other relevant info from market transactions involving identical or comparable assets/liabilities
The income approach involves
Discounting future cash flow or earnings to a present value
The cost approach uses
The current replacement cost of an asset to determine FV
The exchange approach is
Not a recognized valuation technique for FV measurement
Transaction costs are EXCLUDED for FV
So if the transaction price includes them, it cannot represent FVat initial recognition
FV is the price that would be RECIEVED
To sell an asset or paid to transfer a liability in orderly transaction between market participants in the principle market at the measurement date under market conditions
