Fair Value Measurement
公允价值指熟悉市场情况的买卖双方在公平交易的条件下和自愿的情况下所确定的价格，或无关联的双方在公平交易的条件下一项资产可以被买卖或者一项负债可以被清偿的成交价格。高顿网校USCPA小编就来为大家简单介绍一下相关内容。
Fair value is the price that would be received to sell an asset OR paid to transfer a liability in an orderly transaction between market participants in the principal （or most advantageous） market at the measurement date under current market conditions.
In GAAP，FV is exit price.In IFRS，FV is entry or exit price.
The principal market is the market with the greatest volume or level of activity for the asset or liability.
If the principal market do not exist，then use the most advantageous market.
The most advantageous market is the market with the best price for the asset or liability，after considering transaction costs.
Both FV of principal market and most advantageous market，do NOT deduct transaction cost.（F10-4 Illustration）
FV valuation techniques
Market Approach uses prices and other relevant information from market transactions involving identical or comparable assets or liabilities to measure fair value.
FV valuation techniques
Income approach use the present value of future cash flows.
Cost approach uses current replacement cost to measure the fair value of assets.
Criteria for choosing valuation techniques are maximize the use of observable inputs and minimize the use of unobservable inputs.
A change in valuation technique is a change in accounting estimation，which is accounted for prospective adjustment.
Hierarchy of inputs
From Level 1 to 3，from observable to unobservable，from favorable to unfavorable.
Level 1 inputs are quoted prices in active markets for identical assets or liabilities that the reporting entity has access to on the measurement date.
Level 2 inputs are inputs other than quoted market price（level 1）that are directly or indirectly observable for the asset or liability. E.g. Quoted price for similar assets in active market.Or Quoted prices for identical or similar assets in non-active market.
Level 3 inputs are unobservable inputs for the asset or liability. It reflect management‘s assumptions.
