350 FINAL-fair value

ASU 2011-04

-Increases the [required] disclosures for fair value measures, particularly for fair value measurements classified within Level 3 of the fair value hierarchy -Guidance in the Codification (from FAS 157 and ASU 2011-14) is predominantly principles-based (as you will see)

The authoritative literature (fair value guidance) does the following: 1. "Establishes a _________ for financial reporting purposes 2. Provides a ___________ that clarifies the fair value measurement objectives and its application under various standards that require (or permit) fair value measurements 3. Expands _________ about the use of fair value." 4. See comments above related to Level 3 fair value measurements

1. single definition of fair value 2. conceptual framework approach 3.disclosures

Current guidance related fair value measurement and disclosure can be found in Topic ______ IN IFRS this is called IRFS ______

820, Fair Value Measurement 13 both are identical

Transactions to sell the asset or transfer the liability are -"________________" as the entity has ________ the asset or transferred the liability at the measurement date; if it had no FV measurement would be needed. -Remember from above that ______ is not an issue nor is the ______ to enter into a transaction at the measurement date. -The definition of FV contemplates an "______________". According to Topic 820, an orderly transaction is one "that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities. It is not a ___________ (e.g., __________________)." This is significant as "distressed transactions" are not "orderly" and therefore are not indicative of FV.

-hypothetical transactions, has not -intent; ability -orderly transaction; force transaction; forced liquidation or distressed sale

Fair value measurement is a ______________ that is always from the perspective of __________; not from the _________. It is "based on the ____________ would use in pricing the asset or liability. 1. "A reporting entity's intentions regarding ______ or settling or otherwise fulfilling the ________ are _________ in FV measurement and should ___________." [emphasis added] 2. Synergies-relationships that make things more efficient -___________ related to the asset or liability whose fair value is being measured are also not relevant to FV measurements and ____________. -Synergies available to ____________ should be considered. -Application of this guidance should provide more consistency in fair value measurement from entity to entity.

-market based measurement; market participants ; reporting entity's perspective -assumptions that market participants 1.holding the asset; the liability; not relevant; not be considered 2. -Entity specific synergies; should never be considered -market participants

Definition: Fair value is "the ______ that would be received to _______ or paid to _____________ in an __________ between ____________ at the ____________." (ASC 820-10-20)

-price -sell an asset; transfer a liability -orderly transaction -market participants -measurement date

Indicators that transactions "may not be orderly" 1. There is not ________ to the market for a _________ to allow for ________ activities that are _________ for transactions involving such assets or liabilities under current market conditions. 2. There was a _______________________, but the seller marketed the asset or liability to a ________ market participant. 3. The seller is in or near ____________________(i.e., distressed sale) or the seller was required to sell to meet ___________________________(i.e., forced sale). 4. The transaction price is an _____________ when compared with other recent transactions for the same or similar asset or liability. EXAMPLE 2

1. adequate exposure; period before the measurement date; marketing; usual and customary 2. usual and customary marketing period; single 3. bankruptcy or receivership; regulatory or legal requirements 4. outlier

Entry price vs. exit price: 1. Fair value measurement relies of the notion of an _________ rather than an _________ notion to measure fair value. 2. An "entry price is the price paid to _________ or the amount received to _________ in an exchange transaction." 3. An "exit" price is described in the definition of fair value above and is "conceptually different from its transaction price (an entry price)" EXAMPLE 1

1. exit price; entry price 2. acquire an asset; assume a liability 3.

Identifying the asset or liability subject to fair value measurement - see FV Framework 1. FV is determined for a "particular asset or liability". As a result the entity must take into account any characteristics of the particular asset or liability "_________ would take the characteristics into account in _________at the measurement date." 2. This includes "attributes that are specific to an asset or liability being valued, including any _________ on the asset or liability that ____________would consider that may affect its fair value. ____________ is required to determine whether a restriction is an attribute of ____________________" whose FV is being measured. EXAMPLE 4

1. if market participants; pricing the asset or liability 2. restrictions; market participants; Judgment; the entity or the asset or liability EXAMPLE 4

Characteristics of market participants ("buyers or sellers of an asset or a liability in the exit market"). From ASC 820-10-20 definition of market participants: 1. they are ______ of each other, that is, they are not _________. 2. they are _______, having a ___________ about the asset or liability and the transaction using all available information 3. they are able to enter into a transaction for the asset or liability 4. they are willing into a transaction for the asset or ability EXAMPLE 3

1. independent; related parties 2. knowledgeable; reasonable understanding