Accounting rules sometimes require businesses to report assets at fair value, rather than at historic cost. Examples include asset retirement obligations, derivatives and intangible assets acquired in a business combination. Inputs to consider when measuring fair value, in order of decreasing relevance, are 1) quoted prices in active markets for identical assets and liabilities, 2) observable market data for similar items in active markets, and 3) internally prepared cash-flow projections and other unobservable sources of financial data. A valuation specialist can help management meet its financial reporting responsibilities and ensure adequate controls over these measurements.
