Section 3: 25–35%3E
Fair Value Measurements
Exam Insight
EPS is a high-frequency FAR topic and diluted EPS is where most points are lost. AICPA tests the if-converted method for convertible bonds and the treasury stock method for options - and you have to know when a security is antidilutive (excluded from diluted EPS). The trap: convertible bonds are dilutive only if their per-share impact is less than basic EPS. Always run the antidilution test before including any security.
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What AICPA Wants You to Know
- 1Define fair value using the exit price notion
- 2Apply the ASC 820 three-level fair value hierarchy
- 3Distinguish between recurring and non-recurring fair value measurements
- 4Identify the required note disclosures for each level of the hierarchy
- 5Apply the concept of principal market or most advantageous market