Lesson: Fair Value Hierarchy

In this lesson, Nick Palazzolo, CPA, demystifies the fair value hierarchy used in fair value measurements, breaking it down into the three main levels of valuations. He makes it simple to understand by drawing real-world comparisons: equating level one to easily quoted prices, like those of stocks visible with a quick Google search. For level two, Nick relates to observable prices of similar assets, using a house analogy where a neighbor's recent sale provides a reference point. He then delves into the complexity of level three valuations, where unobservable prices come into play such as estimating the value of a groundbreaking renewable energy discovery, highlighting the need for specialized teams to approximate value in these scenarios.