What is Principal market?
In short
Fair value is measured using prices in the principal market for the asset or liability, the market with the greatest volume and level of activity. If there is no principal market, the most advantageous market is used.
Key takeaways
- The most advantageous market is the one that maximizes the amount received for an asset after transaction and transport costs.
- The fair value itself isn't reduced by transaction costs, but it is adjusted for transport costs.
- Fair value is an exit price from the view of market participants.
Where it's tested
FAR: Conceptual Framework & Financial Statement Presentation — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
Under the FASB conceptual framework, which of the following is one of the two fundamental qualitative characteristics of useful financial information?