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Fair value measurement

FAR Chapter 23 · Area III · Blueprint III.E

Many balance sheet amounts are now measured at fair value: investments, derivatives, impaired assets, assets bought in an acquisition. One standard explains how to arrive at that number, whatever the asset. The Blueprint asks you to recall the valuation techniques and to use them to calculate fair value. Most questions test a handful of definitions: exit price, market participants, principal market, highest and best use, and the three-level hierarchy.

In this chapter

1. What fair value means
2. Which market, and which costs
3. Highest and best use
4. The three valuation approaches
5. The fair value hierarchy
6. Unit of account, present value techniques and thin markets
7. Liabilities and the fair value option
8. Disclosures and a method for questions

This chapter has 8 lessons, 50 practice MCQs with explanations and 10 simulations, plus flashcards and a recall sheet.

What this chapter covers

• Market, income and cost approaches
• highest and best use
• market participants
• the three level hierarchy

Chapter 22: Accounting for income taxes · Chapter 24: Lessee accounting