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AICPA CPA-Financial Exam - Topic 1 Question 62 Discussion

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.
C) II, III, IV.
A) I only.
B) I, II, IV.
D) I, II, III, IV.

AICPA CPA-Financial Exam - Topic 1 Question 62 Discussion

Actual exam question for AICPA's CPA-Financial exam
Question #: 62
Topic #: 1
[All CPA-Financial Questions]

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.

Show Suggested Answer Hide Answer
Suggested Answer: C

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.


by Catarina at Dec 07, 2022, 08:39 PM

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Antonio
10 months ago
I thought all levels had some value, but I guess not!
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Thad
10 months ago
Yup, Level I is all about active markets.
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Zachary
10 months ago
Wait, so Level III is the least reliable? That seems off.
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Madelyn
11 months ago
I agree, but I think management assumptions can be tricky.
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Lillian
11 months ago
Level I inputs are definitely the most reliable.
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Kindra
11 months ago
I’m pretty confident that statement IV is true since it talks about the highest significant input determining the level, but I’m not sure about the others.
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Sabra
11 months ago
I practiced a similar question where we had to identify incorrect statements about fair value hierarchy, and I feel like I might be mixing up the levels.
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Simona
11 months ago
I think statement III is correct because GAAP does require some market data for fair value measurements, right?
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Buddy
11 months ago
I remember that Level I inputs are definitely the most reliable, but I'm not sure about the specifics of Level III.
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Temeka
11 months ago
Hmm, this is a tricky one. I'll need to think carefully about the different specification-based techniques and how they could be used to test the interfaces between the "Route Calculation" components.
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Genevieve
11 months ago
Hmm, this question seems to be testing our knowledge of the specific networking requirements for vSphere with Tanzu. I'll need to think carefully about the different networking components involved and how they might relate to the options provided.
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Odette
11 months ago
Hmm, I'm a bit unsure about this one. I need to review my subnet masking knowledge to figure this out.
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Lajuana
11 months ago
Okay, I've used Ptunnel before for ICMP tunneling, so I'm confident that's one of the correct answers. Let me see what the other options are.
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