How is fair value determined in a fresh start accounting valuation?
Specific guidance has been provided by the FASB on acceptable methods and disclosures related to determining fair value. Fair value is defined as: “The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” It is an exit price or, in other words, the price that would be received to sell an asset or paid to transfer a liability by knowledgeable and independent market participants, including any discounts for risk. It assumes an orderly (not forced) transaction in an active market and assumes the highest and best use of the asset. To determine fair value when conducting a fresh start accounting appraisal, AccuVal considers various market inputs as outlined by the FASB, including: • Quoted prices of identical assets or liabilities, • Market observables such as quoted prices for similar assets, interest rates and yield curves, • Non-observable assumptions that rely on internal information
Related Questions
- FASB has announced it will make changes to the fair value accounting standards in the next few weeks. Why didnt NCUA wait to see if those changes may have impacted the financial position of these corporate credit unions?
- What is a realistic timeframe for the implementation of fair value accounting or Solvency II?
- How does CAUV valuation differ from fair market value?
