Banking Practice Exam 2025 – 400 Free Practice Questions to Pass the Exam

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What is the terminology for the valuation of Level 1 assets under FASB 157?

Marking to market

The terminology for the valuation of Level 1 assets under FASB 157 is known as "marking to market." This approach involves valuing assets based on current market prices, which are readily available and represent the most accurate measure of an asset's fair value. Level 1 assets consist of financial instruments traded in active markets, such as publicly traded stocks and bonds, where market prices are frequently updated and reflect real-time transactions.

Marking to market is essential for ensuring transparency and accuracy in financial reporting, as it provides a clear picture of an asset's worth based on actual market activity. This method contrasts with other valuation techniques that might use less observable inputs or require estimation, which are applicable to Level 2 and Level 3 assets.

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