What it is
Fair value is an exit price between market participants at the measurement date. For each class of asset or liability the entity decides the unit of account, the principal market, the valuation technique and the level of the inputs that drive the result.
This memo records those decisions, the inputs with their sources and levels, the Level 3 detail and rollforward, the controls over pricing and the disclosure inputs. One memo covers one class of item.
When to use it
- For recurring fair value items: derivatives, investments, contingent consideration.
- For nonrecurring measurements: impairment tests, acquisition accounting.
- To support Level 3 amounts that the auditor or a valuation reviewer will test.
What’s inside
- Item, measurement date and basis for fair value
- Unit of account, principal market and highest and best use
- Valuation technique table with weights
- Input table showing observability, source and level
- Level 3 ranges, rollforward, transfers, controls and disclosure inputs
Standard cited
This template follows ASC 820. It is written in our own words, except for phrases the standard requires the document to contain, with [bracketed placeholders] for client details, amounts in USD and dates as MM/DD/YYYY. Check it against the current standard and your firm’s methodology before use.
Questions
How is the level of a measurement set?
By the lowest-level input that is significant to the whole measurement. A measurement using mostly Level 2 inputs with one significant unobservable input is Level 3.
What is the principal market?
The market with the greatest volume and level of activity for the item. If there is no principal market, use the most advantageous market. Transaction costs are not part of fair value.
Do nonpublic entities have disclosure relief?
Yes, in part. Nonpublic entities have scaled-back disclosures on items such as the Level 3 rollforward and the quantitative inputs. The memo records the relief the entity applies.
Related templates
- Disclosure Checklist: Fair Value Measurements (ASC 820)
- Fair Value Hierarchy Summary Workbook (ASC 820)
- ASC 815 Hedge Documentation Memo
- ASC 805 Business Combination Accounting Memo
Last updated 11/05/2026. All free templates.