Fair Value

1.Automobiles

CIC owns a group of 10 automobiles, previously used by the senior executives of CIC that are currently for sale.Since they are not in use but held for sale, GAAP permits these automobiles to be recorded at fair value on the balance sheet.The automobiles currently have a carrying value of $35,000 per auto for a total of $350,000.They have low mileage and could be sold in either the retail market or the dealer market.The dealer market is an active market and management could access that market immediately.Management has been told by a reputable dealer that similar autos could be sold for approximately $30,000 per auto for a total of $300,000.The retail market is harder to access due to legal restrictions and would take 6 months to access this market.Pricing guides for the retail market lists the sales prices of similar autos at approximately $34,500 per automobile for a total of $345,000.

(a) Identify as a Financial or Non-Financial Asset

(b)Determine the Fair Value as of March 31, 2021

(C) Level in Fair Value Hierarchy

2.Real estate

CIC has an investment in a condominium project that was completed on January 31, 2021.The carrying amount of the condominium at that date was $25 million and reflected the cumulative investments that CIC made to the developer.Through March 31, 2021 there have not been any sales of any of the condominium units and the developer has just declared bankruptcy.

CIC has taken over the project, hired a management company to oversee the building and a marketing/sales company to sell the individual units.The CIO hired Ace Number One (Ace) real estate valuation and appraisal experts to measure the fair value of the project as of March 31, 2021.Ace ended up valuing the condominium project at $22 million and their report considered a combined approach of comparable sales figures for comparable condominium units (an acceptable GAAP method for valuation).However, the Chief Investment Officer believes that this amount is too low and the correct valuation should be $28 million because the economic outlook is favorable.

(a) Identify as a Financial or Non-Financial Asset

(b)Determine the Fair Value as of March 31, 2021

(C) Level in Fair Value Hierarchy

3 Investment in Chicago Corporation

CIC has an investment in 100,000 shares of Chicago Corporation which is a private company. The stock is currently valued in the accounting records at $15 per share (total value of $1,500,000) which was the value as of the last measurement date of December 31, 2020.There are no market quotes with respect to the fair value of the common stock; however, the private company's operations, size and performance are similar to a company whose stock is traded on the NASDAQ. These similar companies are valued at $17 per share as of March 31, 2021

(a) Identify as a Financial or Non-Financial Asset

(b)Determine the Fair Value as of March 31, 2021

(C) Level in Fair Value Hierarchy

4This is a disclosure from Disney's recent 10-K:"Level 3 borrowings include the Asia Theme Park borrowings, which are valued based on the current borrowing cost and credit risk of the Asia Theme Parks as well as prevailing market interest rates".Why would these be assigned as Level 3 (instead of Level 1 or Level 2) in the footnote disclosure?

5 .Land

CIC has an investment in a 10-acre parcel of land that is located near Los Angeles.The carrying value of the land as of March 31, 2021 was $1 million per acre, or $10 million, and is the equivalent of the cost of the land.The land is currently zoned so that it may be developed for commercial warehouses or industrial manufacturing facilities.Recent similar sales of land within the area to be developed as commercial warehouses have been approximately $900,000 per acre while recent sales of land to be developed as manufacturing are $800,000 per acre.

(a) Identify as a Financial or Non-Financial Asset

(b)Determine the Fair Value as of March 31, 2021

(C) Level in Fair Value Hierarchy

6.Investment in Smith Corporation

CIC has an investment in 100,000 shares of common stock XX Corporation.Smith Corporation is a public company whose stock is traded on the NYSE.The stock is currently valued in the accounting records at $20.00 per share ($2.0 million), which was the value at the last measurement date of December 31, 2020.The CIO is proposing to measure the fair value of the common stock at the bid price for the stock at the close of business on the measurement date of March 31, 2021, which is $25.00 per share.This valuation approach is consistent with what has been used in the past three years by management.Thus, the fair value is $2.5 million at year-end.

(a) Identify as a Financial or Non-Financial Asset

(b)Determine the Fair Value as of March 31, 2021

(C) Level in Fair Value Hierarchy