6.4 Changes in the Principal or Most Advantageous Market

Events that could indicate a change in the principal (or most advantageous) market include (1) a significant change in market conditions, (2) the development of a new market, and (3) the entity’s obtaining access to a market to which it previously did not have access. An entity must evaluate all facts and circumstances in determining whether there has been a change in the principal (or most advantageous) market. Events could lead to a conclusion that there is no longer a principal market for an asset in which an entity would have to identify the most advantageous market. Examples 6-2 and 6-3 illustrate scenarios in which potential changes in the principal (or most advantageous) market have occurred.

At the 2023 AICPA Conference on Current SEC and PCAOB Developments, Gaurav Hiranandani, senior associate chief accountant in the SEC’s Office of the Chief Accountant, addressed various aspects of fair value measurement under ASC 820. He noted that for more traditional markets, such as those for equities and commodities, there may be a limited number of venues in which an entity can transact, and the total volume and level of activity may be concentrated in just one or two of those venues. In addition, market characteristics for those venues, such as pricing, regulatory oversight, and the general availability and reliability of information, may be fairly consistent; thus, a market participant may be able to make an informed determination about the total overall transaction volume and about which one of those venues is the principal or most advantageous market. However, such consistency may not exist for crypto asset markets because of their continuing rapid evolution. Further, the facts and circumstances relevant to the identification of the principal or most advantageous market for crypto assets may change over time and may differ from asset to asset as well as from entity to entity, depending on the activities in which the entity engages.