ASC 820 FAIR VALUE HIERARCHY 1. which pricing method should use in level 1 of fair...

ASC 820 FAIR VALUE HIERARCHY

1. which pricing method should use in level 1 of fair value hierarchy? Either broker quote or vendor price? WHY?

2. how this pricing methods can affect the risk assessment?

Solutions

Expert Solution

ASC 820 is an updated FASB codification. It defines fair value as the price that will be received if an asset is sold or transferred to pay a liability in an orderly transactions.

Fair value hierarchy categories the inputs that are used in valuation techniques in three levels. It gives highest priority to quoted prices for the identical assets and liabilities in the active markets. It gives lowest priority to the unobservable inputs.

1) The pricing method that should be used in level 1 of fair value hierarchy is the quoted prices( that is unadjusted ) in the active markets. These price are accessible by the reporting entity at the measurement date. This price is used as as these provides most reliable evidence of fair value. These are reliable and should be used to measure the fair value whenever applicable.

2) Risk assessment is a process to identify risks, analyze and evaluate it and determining the effective ways to eliminate it. It is an integral part of management plan.This pricing method can affect the risk assessment.

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

According to ASC Topic 820, the fair value of an asset should be based upon

17. According to ASC Topic 820, the fair value of an asset should be based upona. The price that would be paid to acquire the asset.b. The price that would be paid to replace the asset.c. The price that would be received to sell the asset.d. The price that the item is appraised at balance sheet date.18. Which of the following items does not require measurement at fair value on the balance sheet?a. Asset impairments.b. Treasury stock.c. Business combinations.d. Goodwill.

can i use " internal model' in pricing the level 2 securities in fair value hierarchy...

can i use " internal model' in pricing the level 2 securities in fair value hierarchy ? what is the risk assessment? does this internal model should be used in the level 3?

Briefly summarize, then explain the significance of par. 15-1 (scope) of ASC 820-10 (Fair Value Measurement).

Please give one example for each level of the fair value hierarchy.

ASC 815 recommends that a derivative be valued at its fair market value. Furthermore, in a...

ASC 815 recommends that a derivative be valued at its fair market value. Furthermore, in a cash flow hedge, the changes in the value are separated into the effective and non-effective portions. How does the separation of the changes in value impact other comprehensive income (OCI) and current income in the income statement? Why?

1. Discuss the difference between intrinsic value method and fair value method in accounting for stock...

1. Discuss the difference between intrinsic value method and fair value method in accounting for stock option compensation (5pts). Which method do start-up companies prefer and why? 2.If both market approach and income approach are available for the valuation of a stock, which do you prefer as an investor and why?

Question