The Generally Accepted Accounting Principles (GAAP) framework requires that a number of assets and liabilities be recorded at their fair values. This requirement is a significant departure from the traditional approach of only recording these items at their historical costs. It also requires a significant knowledge of how to develop and regularly update fair values.
Fair Value Accounting addresses all aspects of the GAAP requirement to report certain assets and liabilities at their fair values. This includes when fair value measurements should be performed, the parameters for measuring fair value, and how to disclose this information in the financial statements. The course also notes those situations in which fair value is used to evaluate whether assets have been impaired, giving you a complete understanding of the topic.
Upon successful completion of this course, participants will be able to:
- Identify the primary concepts and rules relating to the derivation of fair value measurements.
- Cite the situations in which the fair value option can be used.
- Recognize the situations in which fair values or a modified form of fair values are applied to the valuation of acquired assets and liabilities, as well as the impairment analyses for inventory, fixed assets, and goodwill.
Table of Contents
Chapter 1 – Fair Value Accounting
The Fair Value Concept
The Active Market Concept
Transaction Costs and Other Conditions
Bid and Ask Pricing
Measuring Fair Value when Transaction Volume is Low
Identifying Transactions That Are Not Orderly
Highest and Best Use
The Unit of Measure
Entry and Exit Prices
When the Transaction Price May Not Equal Fair Value
Fair Value Measurement Approaches
Calibration of the Valuation Technique
Switching Valuation Techniques
Hierarchy of Information Sources
The Net Asset Value Variation
Fair Value Measurements for Liabilities
Fair Value Measurement Process Flow
Present Value Analysis
Lattice Model Analysis
Use of Multiple Valuation Methods
Fair Value Disclosures
Fair Value of Financial Instruments
Chapter 1 – Review Questions
Chapter 2 – The Fair Value Option
The Fair Value Option
Fair Value Option Disclosures
Chapter 2 – Review Questions
Chapter 3 – Fair Value in Asset and Liability Evaluation
Fair Value in Business Combinations
Fair Value in Inventory Evaluation
Fair Value in Fixed Asset Evaluation
Fair Value in Goodwill Evaluation
Chapter 3 – Review Questions
Review Question Answers and Rationales
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