Thursday, September 18, 2008

The Debts of the Spenders: Return to Level 3 Accounting

Since some of you have been asking for Level 3 accounting, here is a short review:

Under FASB terminology, Level 1 means mark-to-market, where an asset's worth is based on a real price. Level 2 is mark-to- model, an estimate based on observable inputs and used when there aren't any quoted prices available. Level 3 values are based on “unobservable” inputs reflecting companies' “own assumptions” about the way assets would be priced.