On-Demand Webinar
Fair Value Measurements Under GAAP
CE credits
- 1.50 ATATX (Aurora Accounting)
What You'll Learn
Fair value measurement is a foundational accounting principle that influences financial reporting and disclosure practices across multiple industries. Governed by Accounting Standards Codification (ASC) Topic 820, fair value standards are essential for determining the accurate representation of assets and liabilities on financial statements. This webinar will provide an in-depth exploration of the definitions and core principles behind fair value measurements, highlighting how these standards are applied in various contexts and why they matter to financial professionals.
- Understand the key elements involved in determining fair market value under ASC 820
- Learn the differences between fair value and fair market value and when each applies
- Explore the three valuation approaches and how to apply them accurately
- Gain clarity on the fair value hierarchy and related disclosure requirements
- Identify commonly used valuation techniques and their application
- Examine how fair value measurement affects impairment testing
- Review industry-specific use cases for fair value implementation
View Full Description
Participants will gain practical insights into the three primary valuation approaches, how to navigate the fair value hierarchy, and common challenges faced during implementation. The session will also distinguish between fair value and fair market value, and delve into the appropriate valuation techniques used under GAAP. Special focus will be placed on impairment testing and industry-specific applications, ensuring attendees walk away with applicable knowledge they can use immediately in their roles.
This session is ideal for accountants, auditors, financial analysts, and anyone involved in the preparation or review of financial statements under U.S. GAAP. Attendees will benefit from real-world examples and practical strategies to enhance compliance and accuracy in financial reporting.
Why this webinar is worth your time:
By attending, you'll strengthen your understanding of one of the most complex areas in accounting—ensuring you're equipped to apply fair value principles with confidence and accuracy.
Level: Beginner/Intermediate
Format: Live webcast
Instructional Method: Group: Internet-based
NASBA Field of Study: Accounting (2 hours)
Program Prerequisites: None
Advance Preparation: None
Meet Your Speaker
Chuck Borek
Chuck Borek is a practicing attorney and founder of the Borek Group, LLC. Chuck is also a CPA, and his background includes five years as a partner in a public accounting firm. He received his law degree and MBA summa cum laude from the University of Baltimore in 1993, where he was...
View Full Bio of Chuck BorekCE Credits
These are the continuing education credits available to you for this webinar.
- 1.50 ATATX Aurora Accounting Aurora Training Advantage is offering continuing education points designed to recognize dedication to training and excellence in accounting.
Frequently Asked Questions
What is fair value measurement under GAAP and why does it matter for financial reporting?
Fair value measurement under GAAP is governed by Accounting Standards Codification (ASC) Topic 820, which provides a unified framework for determining the price at which an asset would be sold or a liability transferred in an orderly transaction between market participants at the measurement date. Unlike historical cost accounting, fair value reflects current market conditions, providing investors and creditors with more relevant information for decision-making. Fair value measurements influence a wide range of financial statement items—including investments, derivatives, goodwill impairment testing, business combinations, and certain liabilities. The ASC 820 framework requires that fair value be measured from the perspective of a market participant, not the reporting entity, based on the principal or most advantageous market. For accountants, auditors, and financial analysts, understanding fair value measurement is essential to ensuring accurate, compliant financial reporting and meeting disclosure obligations under U.S. GAAP.
What are the three levels of the fair value hierarchy under ASC 820?
The fair value hierarchy under ASC 820 categorizes the inputs used in valuation techniques into three levels based on their observability and reliability. Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities—the most reliable basis for fair value, commonly used for publicly traded equity securities and exchange-traded derivatives. Level 2 inputs are observable inputs other than Level 1 prices, such as quoted prices for similar assets in active markets, quoted prices for identical assets in inactive markets, or inputs derived from observable market data through correlation. Level 3 inputs are unobservable—based on the reporting entity's own assumptions about what market participants would use, typically employed when observable market data is unavailable. The hierarchy requires entities to maximize use of higher-level inputs and minimize reliance on Level 3 inputs. Disclosure requirements are most extensive for Level 3 measurements due to their inherent subjectivity and susceptibility to management judgment.
What are the three primary valuation approaches used under GAAP fair value measurement?
ASC 820 recognizes three broad valuation approaches for measuring fair value, each suited to different types of assets and market conditions. The Market Approach uses prices and information generated by market transactions involving identical or comparable assets or liabilities, making it most applicable when active comparable market data is available—such as for publicly traded securities or real estate in active markets. The Income Approach converts expected future cash flows or income into a single discounted current amount, widely used for intangible assets, financial instruments, and businesses where market data is limited; techniques include discounted cash flow analysis and option pricing models. The Cost Approach reflects the amount that would be required to replace the service capacity of an asset (current replacement cost), commonly used for tangible assets like property and equipment. In practice, multiple approaches may be applied and reconciled to arrive at the most representative fair value estimate, and the chosen approach must be documented with clear support.
What is the difference between fair value and fair market value under accounting standards?
Fair value and fair market value are related concepts but are defined and applied in distinct contexts. Fair market value, used primarily in tax law, estate planning, and legal proceedings, is the price at which property would change hands between a willing buyer and a willing seller, neither under compulsion, and both having reasonable knowledge of relevant facts—it assumes a hypothetical transaction between hypothetical parties. Fair value under GAAP (ASC 820) is more specifically defined as an exit price—the price to sell an asset or transfer a liability in an orderly transaction in the principal or most advantageous market at the measurement date, from the perspective of a market participant. While both concepts involve hypothetical market-based pricing, fair value under GAAP incorporates a specific measurement framework, a three-level input hierarchy, and extensive disclosure requirements not present in the fair market value standard. Financial professionals must understand which standard applies in each context—tax vs. financial reporting—to avoid misapplication.
How does fair value measurement affect goodwill and asset impairment testing under GAAP?
Fair value measurement plays a central role in impairment testing for several asset types under GAAP, most notably goodwill, indefinite-lived intangible assets, and long-lived assets. For goodwill impairment under ASC 350, entities compare the fair value of a reporting unit to its carrying amount—if the carrying amount exceeds fair value, an impairment loss is recognized. This requires a defensible fair value estimate of the reporting unit, often using the income approach (discounted cash flows) or market approach (comparable company multiples). For indefinite-lived intangibles, entities compare the fair value of the asset to its carrying amount, recognizing impairment when carrying value exceeds fair value. Long-lived asset impairment under ASC 360 uses fair value to measure the impairment loss once an asset group is determined to be non-recoverable. Because impairment determinations directly affect reported earnings and book value, accurate fair value measurement in this context is one of the highest-scrutiny areas in financial reporting and external audit, making deep knowledge of ASC 820 essential for accounting professionals.