Which of the following statements is false regarding the hierarchy of fair value measurements now provided in GAAP?
A) The hierarchy clarified the inputs a company is to use to measure fair value.
B) The valuation method selected must be consistent with the market approach, the income approach, or the cost approach.
C) The three levels of inputs provide defined priorities for sources of available inputs for valuation.
D) The hierarchy eliminates all subjectivity and estimation from the valuation process.

Question

Quizplus · Accepted Answer

The hierarchy of fair value measurements in GAAP does not eliminate all subjectivity and estimation from the valuation process. Some level of subjectivity and estimation is still required in fair value measurements, especially for Level 3 inputs which rely more heavily on unobservable inputs.

Which of the Following Statements Is False Regarding the Hierarchy