Apply the attached list to ASC 820, list and explain all areas of “required read

Question

Apply the attached list to ASC 820, list and explain all areas of “required reading” a researcher should consider when researching fair value measurement questions.

Was my search effort thorough? A checklist of required reading 1. Confirm that your specific transaction is within the scope of this guidance 2. Find guidance that appears to be on point (for example, in the Recognition section) 3. Read any preceding paragraphs that are related (as indicated by >>) 4. Skim the rest of that section (e.g., the rest of Recognition) for other potentially relevant guidance 5. Skim for potentially relevant headings in the Implementation Guidance section (e.g., headings related to Recognition) 6. See whether SEC guidance is available for the section you are searching (e.g., S-25 and S-99 may both offer recognition guidance)

Explanation / Answer

Fair Value: The price for which an asset is sold or a liability is transferred between the market participants at a measurable date in an orderly transaction. The various lists and explanation is given below for a researcher to consider while answering fair value measurement questions.

Level 1: The fair value is based on market inputs observed directly from the active market. Eg. Stock price of a company and deciding the fair value.

Level 2: The fair value is based on market inputs observed from the less active market. Eg. Bonds of a municipal and deciding the fair value is a bit difficult to that of level 1 instruments

Level 3: The fair value is based on unobserved inputs. Eg. Asset valuation of a company which should be done on assumptions without specific values which is a difficult ones to that of level 1 & 2

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