What is Fair value valuation techniques?
In short
Fair value is estimated using one or more of three approaches: the market approach (prices of identical or comparable items), the income approach (discounted future amounts) and the cost approach (current replacement cost).
Key takeaways
- Techniques should maximize the use of observable inputs and minimize unobservable ones.
- The level in the fair value hierarchy depends on the inputs, not the technique.
- Changing a technique is a change in estimate.
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?