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Codification Topic 820 Fair Value Measurements and Disclosures Fair Value Measurements SFAS N0. 157, September 2006 "Fair Value Measurements" Fair Value is the price an entity would receive when an asset is sold or the price an entity would pay when a liability is transferred. Such transaction should be an orderly transaction between market participants at the measurement date. Valuation Techniques Three approaches 1. Market approach --> based on information from market transactions 2. Income approach --> based on future income --> e.g., present value techniques 3. Cost approach --> based on current replacement cost Inputs to Valuation Techniques Three levels of inputs: Fair Value Hierarchy 1. Level 1 inputs --> unadjusted quoted prices in active markets for identical assets or liabilities 2. Level 2 inputs --> quoted prices for similar assets or liabilities in active markets --> quoted prices for identical or similar assets or liabilities in markets that are not active 3. Level 3 inputs --> unobservable inputs for the asset or liability |
Codification Topic 820 Fair Value Measurements and Disclosures |
Subtopics of Codification Topic 820 820-10 Overall |
Accounting Terms of Codification Topic 820-10 Active market Brokered Market Cost approach Dealer market Discount rate adjustment technique Entry price Exchange market Exit price Expected cash flow Fair value Financial asset Financial liability General market risk Highest and best use Income approach Incremental direct costs Inputs Level 1 inputs Level 2 inputs Level 3 inputs Market approach Market participants Market-corroborated inputs Most advantageous market Nonperformance risk Observable inputs Obsolescence Orderly transaction Present value Principal market Principal-to-principal market Related parties Risk premium Systematic risk Transaction costs Unit of account Unobservable inputs Unsystematic risk |
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