The accounting for liabilities, both current and long-term, and equity has changed significantly since the inception of the FASB. Discuss some of the primary changes in the accounting (measurement and reporting) for liabilities and equity that the FASB has implemented.
FASB established a traditional fair value hierarchy as explained in Topic 820. There are three levels of assets and liabilities, which have a different disclosure level. Level 1 assets and liabilities value is based on quoted price of an active market. There will be no adjustments made to the fair value. Level 2 assets and liabilities value is based on "observable inputs," which may or may not be a quoted price of an active market. The value may be based on the price of an identical or similar asset that is listed in an active or inactive market or interest rate and yield curves. Level 3 assets and liabilities value is based on "unobservable inputs," which maybe an organization's internal estimate and set pricing model. This type of asset or liability is not liquid and extremely risky that must adhere ...
The solution is a 519-word discussion on FASB liabilities, including a look at critical clarifications on the fair value method and equity instruments.