10.1 Introduction
ASC 820-10
35-1 The fair value measurement
framework, which applies at both initial and subsequent
measurement if fair value is required or permitted by
another Topic, is discussed primarily in this Section.
Section 820-10-30 sets out additional guidance specific to
applying the framework at initial measurement. This Section
is organized as follows:
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Definition of fair value
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Valuation techniques
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Inputs to valuation techniques
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Fair value hierarchy
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Measuring fair value when the volume or level of activity for an asset or a liability has significantly decreased
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Identifying transactions that are not orderly
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Using quoted prices provided by third parties
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Measuring the fair value of investments in certain entities that calculate net asset value per share (or its equivalent).
Many Codification topics require or permit the subsequent measurement of assets or
liabilities at fair value (see Section 2.1.2
for more information). ASC 820-10-35 provides guidance on the subsequent measurement
of items at fair value and applies to both recurring and nonrecurring measurements.
This chapter discusses the subsequent-measurement requirements of ASC 820 as well as
the application of these requirements to specific types of items or transactions.
See Chapter 9 for discussion of initial
measurements at fair value.
In addition to the guidance in ASC 820, the AICPA has issued fair value measurement
guidance1 in the form of technical questions and answers, practice aids, and guides,
including the following accounting and valuation guides:
Further, because ASC 820 is substantially converged with IFRS 13,
the IASB Expert Advisory Panel report may also be helpful for entities that apply U.S. GAAP to
use in measuring or disclosing fair value (since the best practices outlined in the
report were incorporated into IFRS 13). The IASB’s project summary and feedback statement for IFRS 13 describes
how the report is related to IFRS 13:
In May 2008 we established a Fair Value Expert Advisory
Panel that included preparers, auditors and users of financial statements,
as well as regulators.
The Panel’s remit was to help us:
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review best practices in the area of valuation techniques; and
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formulate any necessary additional practice guidance on valuation methods for financial instruments and related disclosures when markets are no longer active.
In October 2008 our staff published a report summarising the
Panel’s discussions. The report . . . summarised the valuation and
disclosure practices undertaken by large financial institutions in the
financial crisis. The requirements in IFRS 13 are
consistent with that report. [Emphasis added]
Footnotes
1
Note that while such AICPA guidance constitutes an additional resource for
entities to use in measuring or disclosing fair value, it is
nonauthoritative, has not been approved by the FASB or SEC, and is not a
substitute for the application of ASC 820.