Fair Value Accounting: An Overview (Course Id 2443)

• Who is this course for?
  This course is intended for anyone needing Continuing Professional Education (CPE), including CPAs, accountants, and professionals interested in fair value accounting.

• What is this course about or what problem does this course solve?
  This course provides a conceptual overview of fair value accounting as defined in ASC 820 and related auditing standards, clarifying its application and addressing the complexities and controversies surrounding it.

• How can the knowledge from this course be used?
  The knowledge gained can be applied to accurately measure, report, and audit fair value in financial statements in accordance with ASC 820 and SAS No. 101 standards.

• Why is this course important to a CPA, Accountant, or IRS Enrolled Agent?
  Understanding fair value accounting is essential for professionals who prepare or audit financial statements, as it involves significant judgments and has become a central part of U.S. GAAP.

• When is this course relevant or timely?
  This course is especially timely for professionals dealing with evolving accounting standards, financial instrument reporting, or fair value controversies in volatile or illiquid markets.

• How is a course like this consumed or used?
  The course is delivered as a NASBA QAS self-study text-based program, requiring participants to read the material and pass a final exam with at least a 70% score to earn CPE credit.

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. This course will also provide an overview of the authoritative guidance for auditing fair value measurements and disclosures, SAS No. 101.

NASBA QAS - Text - NASBA Registry - 2443

Course Learning Objectives

• Define ‘fair value’ and explain the fair value framework & hierarchy included in ASC 820 Fair Value Measurements and Disclosures.
  
• Identify the roles that management and the auditor have in the fair value measurement process.
  
• Recognize the key aspects of the fair value option.
  
• Recognize the limitations of fair value accounting.

Chapter 1
The Evolution of Fair Value

• Define the ‘historical cost’ method of accounting and calculate the current ‘amortized cost’ of assets and liabilities accounted for under this method.
  
  
• Define the ‘fair value’ method of accounting for assets and liabilities and recognize accounting practices consistent with this method.
  
  
• Recognize the differences between the ‘historical cost’ and ‘fair value’ methods of accounting.

Chapter 2
Measurement

• Define ‘fair value’ as outlined in ASC 820 Fair Value Measurements and Disclosures.
  
  
• Recognize accounting practices that are consistent with the fair value framework established in ASC 820.

Chapter 3
Valuation Techniques & Inputs

• Recognize valuation techniques that are consistent with the guidance of ASC 820.
  
  
• Recognize the proper classification of valuation inputs into the levels of the fair value hierarchy.

Chapter 4
Auditing Fair Value Measurements and Disclosures

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

Chapter 5
The Fair Value Option

• Recognize the proper application of the fair value option under ASC 825-10.
  
  
• Identify assets & liabilities that are eligible for the fair value option.

Chapter 6
The Future of Fair Value

• Recognize the principal arguments against fair value accounting
  
  
• Explain the limitations of applying the ASC 820 definition of fair value when markets are illiquid or inactive

Chapter 1 - The Evolution of Fair Value

1.1   Historical Cost

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

1.3   A New Sense of Urgency: The Enron Crisis

1.4   ASC 820: Fair Value Measurements and Disclosures

Chapter 2 - Measurement

2.1   Definition of Fair Value

2.2   Fair Value Framework

2.2.1   The price

2.2.2   The principal (or most Advantageous) market

2.2.3   Market participants

2.2.4   Attributes of the asset or liability

2.2.5   “Highest and best use”

2.2.6   Unit of account

2.3   Fair Value at Initial Recognition

Chapter 3 - Valuation Techniques & Inputs

3.1   Valuation Techniques

3.2   Valuation Inputs

3.3   Fair Value Hierarchy

3.3.1   Level 1 Inputs

3.3.2   Level 2 Inputs

3.3.3   Level 3 Inputs

3.4   Pricing Services and Broker Quotes

3.5   Bid-Ask Prices

Chapter 4 - Auditing Fair Value Measurements and Disclosures

4.1   ASC 820 Disclosures

4.1.1   Recurring fair value measurements

4.1.2   Non-recurring fair value measurements

4.2   SAS No. 101, Auditing Fair Value Measurements and Disclosures

4.2.1   Understanding the entity’s process for determining fair value measurements and disclosures and the relevant controls, and assessing risk

4.2.2   Evaluating conformity of fair value measurements and disclosures with GAAP

4.2.3   Testing the entity’s fair value measurements and disclosures

4.2.4   Testing management’s significant assumptions, the valuation model, and the underlying data

4.2.5   Auditing Disclosures about Fair Values

Chapter 5 - The Fair Value Option

5.1   Introducing the Fair Value Option

5.2   ASC 825-10 Financial Instruments: The Fair Value Option

5.2.1   Scope

5.2.2   Excluded items

5.2.3   Accounting Election

5.2.4   Timing

5.2.5   Accounting Impact

Chapter 6 - The Fair Value Controversy

6.1   The Great Recession of 2007-2009

6.2   The Critical Backlash at “Fair Value”

Glossary