market participant assumptions

This Subtopic gives mining-specific guidance on accounting for mineral rights and mining assets within Property, Plant, and Equipment. It clarifies that undeveloped land does not qualify for interest capitalization, how mineral resource asset current costs are measured when current cost disclosures are provided, and—most importantly—that impairment cash flow estimates for mining assets must include value beyond proven and probable reserves (with the related development and extraction outflows) and must reflect market-participant assumptions about mineral price fluctuations.

This Subtopic gives industry-specific guidance on how a mining entity measures mineral rights and other mining assets in a business combination purchase price allocation. It requires that value beyond proven and probable reserves (VBPP) be included in the value allocated to mining assets to the extent a market participant would include it, and that anticipated future mineral price fluctuations be reflected consistently with marketplace participant expectations.

ASC 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price), and provides a single framework for measuring it plus related disclosures. Fair value is a market-based, not entity-specific, measurement, determined in the principal (or, absent one, most advantageous) market using assumptions market participants would use, maximizing observable and minimizing unobservable inputs. Inputs are categorized in a three-level hierarchy (Level 1 quoted prices, Level 2 other observable inputs, Level 3 unobservable inputs), with the whole measurement classified at the lowest level input significant to it.

This industry Subtopic supplements ASC 820 for brokers and dealers in securities. It lists non-exhaustive factors broker-dealers have considered in determining the fair value of a financial instrument (issuer's financial standing, market liquidity, restrictions on salability, pending offerings or reorganizations, dealer pricing, recent trades, etc.) and requires specific disclosure when an instrument is carried below its quoted price.