Fair Value

1.A pharmaceutical company acquires a company with two drugs. Drug A is a cholesterol-lowering drug. By itself, Drug A is moderately effective. Drug B is another moderately effective cholesterol-lowering drug. When taken together, Drug A and Drug B are highly effective at lowering cholesterol levels. On a standalone basis, Drug A has a fair value of $300 million and Drug B has a fair value of $200 million. When the drugs are valued together, Drug A and Drug B have a combined fair value of $525 million.

(a) What is the Highest and Best Use of these two pharmaceutical drugs?

(b) What is the Fair Value?

2.1.In a territory, there are two available markets for coffee beans:

Market 1:Export:This is the market in which higher prices are available for the producer. However, there are limitations in the volumes that can be sold in this market because the government sets a limit on the volume of exports and each producer needs to get an authorization to export its production. It is rare for the government to authorize more than 25% of the total production for export.

Market 2:Domestic:The prices are lower in this market as compared to the export market, but there are no restrictions in terms of volume (other than the demand for the product by purchasers).

Which is the principal market?

a.Export

b.Domestic

Explain what the factors were that guided your choice for the principal market.

2.FASB released ASU 2018-13 in August, 2018.This ASU impacts the disclosures for fair value measurement (ASC 820)

a.Why did FASB issue this update?

b.Who is affected by the amendments in this update?

c.The main provisions of this update fall into what 3 categories?

d.The codification lists the following for the effective date(s) for ASU 2018-13;

(P) December 16, 2019; (N) December 16, 2019

Based upon these effective dates have all public and private entities implemented the new guidance?As of June 1, 2021 will all both public and private entities completed their first fiscal year of this new guidance?Explain your answer