When measuring the fair value of a liability, which of the following is assumed:
A) The liability is settled by the holder.
B) The liability will be settled by the market participant.
C) The liability will not be settled.
D) The liability is settled with the counterparty on measurement date.

Question

Quizplus · Accepted Answer

When measuring the fair value of a liability, it is assumed that the liability will be settled by the market participant, which means the liability will be settled by an unrelated party in an orderly transaction. This assumes an exit value rather than a settlement value which is the case in the option A and D. Option C is not relevant since the assumption is that the liability will be settled.

When Measuring the Fair Value of a Liability, Which of the Following