Fair Value Measurements: Practical Guidance and Implementation, Second Edition

November 2012 978-1-118-22907-1 Hardcover (592 pages)

Mark Zyla

John Wiley & Sons, Inc.

Now in a second edition, Fair Value Measurement: Practical Guidance and Implementation helps you succeed in understanding the fair value accounting rules that entities must follow. The result is a resource that you can rely on to understand the importance of valuation and the concepts that define it. In basic, nontechnical language, author Mark Zyla presents practical direction for best practices of financial valuation as well as for understanding the many FASB pronouncements involving fair value. An essential guide for auditors and valuation specialists, Fair Value Measurement: Practical Guidance and Implementation, Second Edition brings you up to speed on what fair value really means.
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Chapter 1: The History and Evolution of Fair Value Accounting

  • Why the Trend toward Fair Value Accounting?
  • History and Evolution of Fair Value
  • Fair Value Accounting and the Economic Crisis
  • The FASB and IASB Convergence Project
  • The Future of Fair Value Measurement
  • Conclusion
  • Notes

Chapter 2: Fair Value Measurement Standards and Concepts

  • FASB ASC 820, Fair Value Measurement
  • Disclosures
  • Fair Value Option
  • Conclusion
  • Notes

Chapter 3: Business Combinations

  • Mergers and Acquisitions
  • Accounting Standards for Business Combinations—A Brief History
  • ASC 805, Business Combinations
  • Other Business Combination Highlights
  • Subsequent Accounting for Goodwill and Other Intangible Assets
  • Conclusion
  • Notes

Chapter 4: The Nature of Goodwill and Intangible Assets

  • History of Intangible Assets
  • Intellectual Property
  • Economic Basis of Intangible Assets
  • Identification of Intangible Assets
  • Useful Life of an Intangible Asset
  • Intangible Assets and Economic Risk
  • Goodwill
  • Economic Balance Sheet
  • Conclusion
  • Notes

Chapter 5: Impairment

  • Evolution of Impairment Testing
  • Applicable FASB Guidance for Impairment Testing
  • Accounting for the Impairment of Long ]Lived Assets
  • Goodwill Impairment Testing
  • Testing Other Indefinite ]Lived Intangible Assets for Impairment
  • Conclusion
  • Notes
  • Appendix 5A: Example of a Qualitative Impairment Analysis—PlanTrust, Inc.
  • Financial Accounting Standards Board ASC 350, Intangibles—Goodwill and Other
  • PlanTrust, Inc.
  • Notes

Chapter 6: The Cost Approach

  • The Cost Approach under FASB ASC 820, Fair Value Measurement
  • Economic Foundation for the Cost Approach
  • Cost versus Price versus Fair Value
  • The Role of Expected Economic Benefits in the Cost Approach
  • Reproduction Cost versus Replacement Cost
  • Components of Cost
  • Obsolescence
  • The Relationships among Cost, Obsolescence, and Value
  • Physical Deterioration
  • Functional (Technological) Obsolescence
  • Economic (External) Obsolescence
  • Applying the Cost Approach
  • Taxes under the Cost Approach
  • Limitations of the Cost Approach
  • Conclusion
  • Notes

Chapter 7: The Market Approach

  • Measuring the Fair Value of an Entity Using a Market Approach
  • Conclusion
  • Notes
  • Appendix 7A: Using the Guideline Transaction Method to Measure the Fair Value of a Privately Held (or Thinly Traded) Debt Security

Chapter 8: The Income Approach

  • Discounted Cash Flow Method
  • Multiperiod Excess Earnings Method
  • FASB Concepts Statement 7
  • Rates of Return under the Income Approach
  • The Income Increment/Cost Decrement Method
  • Profit Split Method
  • Build Out Method, or “Greenfield Method” (With and Without)
  • Weighted Average Cost of Capital Calculation
  • Conclusion
  • Notes

Chapter 9: Advanced Valuation Methods for Measuring the Fair Value of Intangible Assets

  • Limitations of Traditional Valuation Methods
  • Real Options
  • Using Option Pricing Methodologies to Value Intangible Assets
  • Black Scholes Option Pricing Model
  • Binomial or Lattice Models
  • Monte Carlo Simulation
  • Decision Tree Analysis
  • Conclusion
  • Notes

Chapter 10: The Remaining Useful Life of Intangible Assets

  • FASB Guidance on Determining the Remaining Useful Life
  • Considerations in Measuring Useful Lives of Intangible Assets
  • Guideline Useful Lives
  • Conclusion
  • Notes

Chapter 11: Fair Value Measurement for Alternative Investments

  • Investments in Certain Entities That Calculated Net Asset Value per Share
  • AICPA Technical Practice Aid
  • AICPA Guidance for Determining the Fair Value of Investment
  • U.S. Private Equity Valuation Guidelines
  • Fair Value Measurement for Alternative Investment Funds
  • Conclusion
  • Notes

Chapter 12: Contingent Consideration

  • Contingent Consideration: Earn ]Outs in Business Combinations
  • Accounting for Contingent Consideration
  • Conclusion
  • Notes
  • Appendix 12A: Measuring the Fair Value of a Loan Guarantee
  • The Jordan Lee Fund Guarantee of Townsend Farm Development, LLC
  • Notes

Chapter 13: Auditing Fair Value Measurement

  • Auditing Standards
  • Audit Standards for Fair Value Measurements and Disclosures
  • The Audit Process
  • Auditing Estimates in Fair Value Measurements
  • AU 328, Auditing Fair Value Measurements and Disclosures
  • PCAOB Staff Audit Practice Alert No. 2
  • PCAOB Staff Audit Practice Alert No. 9
  • SEC Audit Guidance
  • AICPA Non ]Authoritative Guidance
  • The Appraisal Foundation
  • Conclusion
  • Notes
  • Appendix 13A: Auditing a Business Combination or a Step 2 Impairment Test
  • General
  • Income Approach
  • Cost Approach
  • Market Approach
  • Appendix 13B: Auditing a Step 1 Goodwill Impairment Test
  • General
  • Income Approach
  • Market Approach
  • Appendix 13C: Survey of Fair Value Audit Deficiencies
  • Audit Deficiencies Increase in Difficult Economic Times
  • PCAOB Inspections
  • Methodology
  • Description of a Deficiency
  • Audit Deficiency Trends
  • FVM Deficiencies
  • Impairment Deficiencies
  • Conclusion
  • Notes

Chapter 14: Fair Value Measurement Case Study

  • Learning Objectives
  • Business Background and Facts—Mobile Apps Source, Inc.
  • Note
  • Appendix 14A: Suggested Case Study Solutions
  • Information Request—ASC 350
  • Information Request for Business Combination—ASC 805
  • Glossary of International Business Valuation Terms
  • Bibliography
  • About The Author
  • Index