FAS 157 is a financial accounting standard that establishes a framework for classifying and measuring financial instruments. It was issued by the Financial Accounting Standards Board in September 2006.
FAS 157 is important because it provides guidance on how to account for financial instruments that are not easily classified into traditional categories such as debt or equity. This is important because financial instruments are often complex and have features that can make them difficult to classify.
FAS 157 establishes three categories of financial instruments:
1. Fair value instruments: These are instruments that are measured at fair value on an ongoing basis. 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 at the measurement date.
2. Other financial instruments: These are instruments that are not measured at fair value on an ongoing basis. They are either measured at amortized cost or held-to-maturity.
3. Non-financial instruments: These are instruments that are not financial instruments as defined by FASB Accounting Standards Codification 310-20.
FAS 157 is important because it provides guidance on how to account for financial instruments that are not easily classified into traditional categories such as debt or equity. This is important because financial instruments are often complex and have features that can make them difficult to classify.
FAS 157 establishes three categories of financial instruments:
1. Fair value instruments: These are instruments that are measured at fair value on an ongoing basis. 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 at the measurement date.
2. Other financial instruments: These are instruments that are not measured at fair value on an ongoing basis. They are either measured at amortized cost or held-to-maturity.
3. Non-financial instruments: These are instruments that are not financial instruments as defined by
What are 3 types of assets? 1. Tangible assets: These are physical assets, such as land, buildings, machinery, furniture, and vehicles.
2. Intangible assets: These are non-physical assets, such as patents, copyrights, and goodwill.
3. Financial assets: These are assets that have a monetary value, such as stocks, bonds, and cash.
What are Level 3 inputs? There are four levels of inputs in the CPA process:
1. Financial data
2. Non-financial data
3. Management representations
4. Engagement team observations
Level 3 inputs are management representations. Management representations are any statements made by management about the business, its financial position, or its compliance with laws and regulations. Management representations must be made in writing, and management must be willing to stand behind them.
To obtain management representations, the engagement team will send a request for information (RFI) to management. The RFI will list the specific items of information that the engagement team is seeking. Management will then provide written responses to the RFI.
The engagement team will use the information contained in the management representations to assess the risk of material misstatement in the financial statements. If the engagement team concludes that the risk of material misstatement is high, they will perform additional procedures to obtain assurance that the financial statements are free of material misstatement.
What is a Level 1 asset? A Level 1 asset is an asset that is valued using a pricing model that relies on observable market data. For example, a stock that trades on a public exchange is a Level 1 asset, because its price is based on observable market data.
Level 1 assets are the most liquid assets, and are typically the easiest to value.
What is the meaning of ASC in accounting? The acronym ASC stands for "Accounting Standards Codification." The Codification is the result of the Financial Accounting Standards Board (FASB)'s initiative to consolidate all of the authoritative U.S. generally accepted accounting principles (GAAP) into a single source. The Codification is effective for interim and annual periods ending after September 15, 2009.
The Codification organizes GAAP into roughly 90 accounting topics and displays all levels of GAAP in a consistent structure. The Codification does not establish new GAAP; rather, it reorganizes, clarifies, and supersedes existing GAAP.
The Codification does not change GAAP, but it does provide new numbering for GAAP. For example, the current Accounting Standards Codification topic 210, Balance Sheet, was formerly numbered Statement of Financial Accounting Standards No. 1, Accounting for Business Combinations.
What are the three levels of fair value hierarchy according to FASB? 1. Level 1: Quoted prices in active markets for identical assets or liabilities.
2. Level 2: Inputs other than Level 1 inputs that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that can be corroborated by observable market data.
3. Level 3: unobservable inputs for which there is little or no market data, which require the use of management’s best estimate of what the market would do if the asset or liability were traded.