FASB SFAS 157 was issued September 2006 for application to financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. This Statement, which applies to assets and liabilities, defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. The statement does not apply to assets acquired and liabilities assumed in an acquisition of a business or non-profit activity by a not-for-profit entity that are required to be measured at fair value under FASB Statement No. 164. The objective of a fair value measurement is to determine the price that would be received to sell the asset or paid to transfer the liability at the measurement date which is the exit price. The fair value measurement assumes that the asset or liability is exchanged in an orderly transaction between market participants. For assets, fair value measurement assumes the highest and best use of the asset by market participants, considering the use of the asset that is physically possible, legally permissible, and financially feasible at the measurement date. The highest and best use of the asset establishes the valuation premise. For liabilities, it is assumed that the liability is transferred to a market participant at the measurement date and that the nonperformance risk relating to that liability is the same before and after its transfer. The fair value of the liability shall reflect the nonperformance risk relating to that liability. As in our text, the position in the statement is that valuation techniques must be consistently applied. It emphasizes those valuation techniques using the market approach, income approach, and cost approach to measure fair value. In some cases a single valuing technique may serve the purpose, however in others, using multiple techniques may be more appropriate. The information that is available will help to determine which method that should be used. Examples are provided in Appendix A to illustrate the various approaches for certain transactions. The statement also establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value by placing them into three broad levels in order to increase consistency and provide better comparability. Level 1 is given the highest priority and is based on quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 is based on information other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly through substantiation with observable market data. Level 3 has the lowest priority and is based on unobservable inputs for the asset or liability, primarily, inputs that reflect the reporting entitys own assumptions.

Follow-Up Discussion Expand upon any of the points identified by your classmates and/or ask for clarification on points that you do not understand.

I have provided the classmates response.

300 words