FV
-price that would be received to sell an asset or paid to transfer a liab in an orderly trans between mkt participants @ the measurement date
--> price someone can SELL an asset for given prevailing mkt conditions (EXIT PRICE)
--> NOT COST TO PURCH OR REP
highest and best use assumption
-what a mkt participate would use it for NOT what mgmt is doing with the A/L
--> mgmt could be using the A/L for something different from a mkt participant
treatment of other selling costs
-trans cost: ALWAYS EXCLUDED in estimate of price of FV (think comission costs)
-transportation cost: included if it is NECESSARY TO INCUR THESE COSTS TO GET THE ASSET TO MKT (ex: crude oil, cattle)
orderly trans assumes:
1. entity isn't forced to sell the asset--> can wait for the best price (no fire sales)
2. sale will take place in the principal OR most advantageous mkt
--> all else =.. PRINCIPAL MKT DOMINATES--> if principal mkt doesn't exist have to decide which is mo
principal mkt
mkt with the GREATEST VOL/LEVEL OF ACTIVITY of the A/L
most advantageous mkt
-mkt that would yield the BEST PRICE NET OF ALL COSTS
--> DOESN'T INCLUDE TRANS AND TRANSPORTATION COSTS
level 1 assets
-have QUOTED/MKT PRICES for IDENTICAL assets/liabilities that are ACTIVELY traded
-ex: stock/debt traded on major exchange
level 2 assets
-have:
1. LESS ACTIVE MKTS for identical assets (ex: stk traded on OTC mkts)
2. active mkt for SIMILAR ASSETS (ex: untraded debt secs similar to traded debt secs)
3. LESS ACTIVE OR NO MKT ACTIVITY (NOT QUOTED PRICES) FOR SIMILAR ASSETS BUT THE A/L IS VALU
mkt-corroborated inputs
derived principally from/corroborated by OBSERVABLE MARKET DATA by correlation or other means
level 3 assets
-assets with SIGNIFICANT "UNOBSERVABLE" VALUATION model inputs--> no mkt source we can use
--> unobservable because these are based on MGMTS' SUBJECTIVE JUDGEMENT POTENTIALLY USING THEIR OWN "PROPRIETARY" DATA
--> can typically use DCF methodology (INC AP
if company has AT LEAST 1 significant level 3 estimate..
-appropriate FV hierarchy is level 3
-if includes is at least 1 level 3 SIGNIFICANT ESTIMATE AUTOMATICALLY BECOME LEVEL 3