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Chapter 10 — Subsequent Measurement

10.7 Identifying Transactions That Are Not Orderly

10.7 Identifying Transactions That Are Not Orderly

Footnotes

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Observable transactions as of or near the measurement date for an identical or similar asset or liability represent the most reliable evidence of the fair value of an asset or liability that is not transacted in an active market, provided that such transactions are orderly. However, an entity might need to make adjustments to such observable prices to reflect (1) differences between the item being measured at fair value and the asset or liability whose transaction price is observable or (2) changes in market conditions if the observable transaction is not as of or near the measurement date. If such adjustments are made on the basis of significant unobservable inputs, the fair value measurement in its entirety would be classified within Level 3 of the fair value hierarchy. In these circumstances, an entity may appropriately consider another valuation technique in measuring fair value. See also Section 10.6.3.3.