<Dl> <Dt> Level Three </Dt> <Dd> The FASB describes Level 3 inputs as "unobservable ." If inputs from levels 1 and 2 are not available, FASB acknowledges that fair value measures of many assets and liabilities are less precise . Within this level, fair value is also estimated using a valuation technique . However, significant assumptions or inputs used in the valuation technique are based upon inputs that are not observable in the market and, therefore, necessitates the use of internal information . This category allows "for situations in which there is little, if any, market activity for the asset or liability at the measurement date ." FASB explains that "observable inputs" are gathered from sources other than the reporting company and that they are expected to reflect assumptions made by market participants.In contrast, "unobservable inputs" are not based on independent sources but on "the reporting entity's own assumptions about the assumptions market participants would use ." The entity may only rely on internal information if the cost and effort to obtain external information is too high . In addition, financial instruments must have an input that is observable over the entire term of the instrument . While internal inputs are used, the objective remains the same: estimate fair value using assumptions a third party would consider in estimating fair value . Also known as mark to management . Despite being "assumptions about assumptions," Level 3 inputs can provide useful information about fair values (and thus future cash flows) when they are generated legitimately and with best efforts, without any attempt to bias users' decisions . </Dd> </Dl> <Dd> The FASB describes Level 3 inputs as "unobservable ." If inputs from levels 1 and 2 are not available, FASB acknowledges that fair value measures of many assets and liabilities are less precise . Within this level, fair value is also estimated using a valuation technique . However, significant assumptions or inputs used in the valuation technique are based upon inputs that are not observable in the market and, therefore, necessitates the use of internal information . This category allows "for situations in which there is little, if any, market activity for the asset or liability at the measurement date ." FASB explains that "observable inputs" are gathered from sources other than the reporting company and that they are expected to reflect assumptions made by market participants.In contrast, "unobservable inputs" are not based on independent sources but on "the reporting entity's own assumptions about the assumptions market participants would use ." The entity may only rely on internal information if the cost and effort to obtain external information is too high . In addition, financial instruments must have an input that is observable over the entire term of the instrument . While internal inputs are used, the objective remains the same: estimate fair value using assumptions a third party would consider in estimating fair value . Also known as mark to management . Despite being "assumptions about assumptions," Level 3 inputs can provide useful information about fair values (and thus future cash flows) when they are generated legitimately and with best efforts, without any attempt to bias users' decisions . </Dd> <P> The FASB, after extensive discussions, has concluded that fair value is the most relevant measure for financial instruments . In its deliberations of Statement 133, the FASB revisited that issue and again renewed its commitment to eventually measuring all financial instruments at fair value . </P> <P> FASB published a staff position brief on October 10, 2008, in order to clarify the provision in case of an illiquid market . </P>

In what situation the book value of an asset would equal its fair value