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Which of the following statements is incorrect regarding the inputs that can be used to measure fair value?
i. Level I inputs are the most reliable fair value measurements and Level III inputs are the least reliable.
ii. Level I measurements are quoted prices in active markets for identical or similar assets or liabilities.
iii. A fair value measurement based on management assumptions only (no market data) would not be acceptable per GAAP.
IV. The level in the fair value hierarchy of a fair value measurement is determined by the level of the highest level significant input.
Choice 'c' is correct. Statement I is correct and statements II, III, and IV are incorrect. Statement II is incorrect because Level I measurements are quoted prices in active markets for identical assets or liabilities only. Quoted prices in active markets for similar assets or liabilities are Level II inputs.
Statement III is incorrect because a fair value measurement based on management assumptions only is a
Level III measurement and is acceptable when there are no Level I or Level II inputs or when undo cost or effort is required to obtain Level I or Level II inputs. Statement IV is incorrect because the level in the fair value hierarchy of a fair value measurement is determined by the level of the lowest level significant input.