Accounting (3), Auditing (1)
There are no prerequisites.

Course Description

Numerous FASB Standards have been issued requiring certain items to be measured and reported at 'fair value' on the balance sheet. Prior to the release of ASC 820 Fair Value Measurements and Disclosures (formerly known as SFAS 157), the concept of fair value had never been formally defined in U.S. accounting literature. Since its issuance in September 2006, ASC 820 has become one the most controversial accounting standards ever released.

This course provides a conceptual review of fair value accounting as outlined in ASC 820 and other U.S. accounting standards. The materials also provide an overview of authoritative guidance contained in SAS No. 101, Auditing Fair Value Measurements and Disclosures.


Michael J. Walker, CPA

Michael J. Walker, CPA, is based in New England and has decades of accounting experience in the financial services, information technology services, and construction industries. He has an extensive technical accounting background that includes hands-on experience with U.S. GAAP and International Financial Reporting Standards (IFRS). His expertise includes accounting for financial instruments, securitizations, and other banking products. He graduated from Bentley University with a BS in finance and an MS in accountancy.

Course Specifics

Accounting , Auditing
Aug 30, 2019
There are no prerequisites.

Compliance Information

Qualifies for CA Fraud: No

Learning Objectives

Upon successful completion of this course, participants will be able to:

Chapter 1

  • Define the historical cost method of accounting, noting the application of the concept, pros and cons, and its measurement on the balance sheet
  • Define the fair value method of accounting for assets and liabilities and name accounting practices consistent with this method
  • Recognize the differences between the historical cost and fair value methods of accounting, noting issues and criticisms for each
  • Recognize the historical aspects of ASC 820, noting the elements the standard impacted

Chapter 2

  • Recognize how fair value is defined in ASC 820, Fair Value Measurements and Disclosures, noting accounting policies and prices that are compliant with the definition
  • Identify accounting practices that are consistent with the fair value framework established in ASC 820, noting key concepts, terms, and the interdependence of the various components

Chapter 3

  • Cite the valuation techniques that are consistent with the guidance of ASC 820
  • Identify the proper classification of valuation inputs into the levels of the fair value hierarchy
  • Recognize the due diligence and responsibility requirements for pricing services and broker quotes

Chapter 4

  • Cite accounting practices consistent with the fair value disclosure requirements outlined in ASC 820
  • Cite auditing practices consistent with the standards of fieldwork related to auditing fair value measurements and disclosures included in SAS No. 101
  • Identify roles that management and the auditor have in the fair value measurement process

Chapter 5

  • Recognize the scope of the fair value option under ASC 825-10, noting its proper application, potential benefits, timing of the option, and accounting impact
  • Identify assets and liabilities that are eligible for the fair value option

Chapter 6

  • List the principal arguments and criticisms regarding fair value accounting
  • Identify the limitations of applying the ASC 820 definition of fair value when markets are illiquid or inactive

Table of Contents

Chapter 1 – The Evolution of Fair Value

Learning Objectives

Historical Cost

The Rising Tide of Fair Value: The S&L Crisis

A New Sense of Urgency: The Enron Crisis

ASC 820: Fair Value Measurements and Disclosures

Chapter 1 Summary

Chapter 1 Review Questions

Chapter 2 – Measurement

Learning Objectives

Definition of Fair Value

Fair Value Framework

The Price

The Principal (or Most Advantageous) Market

Market Participants

Attributes of the Asset or Liability

Highest and Best Use

Unit of Account

Fair Value at Initial Recognition

Chapter 2 Summary

Chapter 2 Review Questions

Chapter 3 – Valuation Techniques & Inputs

Learning Objectives

Valuation Techniques

Valuation Inputs

Fair Value Hierarchy

Level 1 Inputs

Level 2 Inputs

Level 3 Inputs

Pricing Services and Broker Quotes

Bid-Ask Prices

Chapter 3 Summary

Chapter 3 Review Questions

Chapter 4 – Auditing Fair Value Measurements and Disclosures

Learning Objectives

ASC 820 Disclosures

Recurring Fair Value Measurements

Nonrecurring Fair Value Measurements

SAS No. 101, Auditing Fair Value Measurements and Disclosures

Understanding the Entity’s Process for Determining Fair Value Measurements and Disclosures and the Relevant Controls and Assessing Risk

Evaluating Conformity of Fair Value Measurements and Disclosures with GAAP

Testing the Entity’s Fair Value Measurements and Disclosures

Testing Management’s Significant Assumptions, the Valuation Model, and the Underlying Data

Auditing Disclosures about Fair Values

Chapter 4 Summary

Chapter 4 Review Questions

Chapter 5 – The Fair Value Option

Learning Objectives

Introducing the Fair Value Option

ASC 825-10 Financial Instruments: The Fair Value Option


Excluded Items

Accounting Election


Accounting Impact

Chapter 5 Summary

Chapter 5 Review Questions

Chapter 6 – The Fair Value Controversy

Learning Objectives

The Great Recession of 2007-2009

The Critical Backlash at “Fair Value”

Chapter 6 Summary

Chapter 6 Review Questions

Review Question Answers and Rationales



Final Examination

Answer Sheet

Course Evaluation

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