Best examples of fair value measurements in financial statements (with real disclosures)

Real-world examples of fair value measurements in financial statements

If you want to understand fair value, you start with the notes, not the textbook. Here are some of the best examples of fair value measurements in financial statements you’ll see over and over again across public company filings:

• Exchange-traded equity securities measured using quoted market prices (Level 1)
• Corporate and municipal bonds valued using observable market inputs (Level 2)
• Interest rate and foreign currency swaps using discounted cash flow models (Level 2)
• Private equity or venture investments in unlisted companies (Level 3)
• Contingent consideration (earn-outs) from acquisitions (Level 3)
• Investment property (for IFRS filers) measured at fair value
• Asset retirement obligations and decommissioning liabilities (present value models)
• Impairment testing for goodwill and long-lived assets that uses fair value techniques

Each of these is an example of fair value measurements in financial statements that you can trace from the balance sheet to the fair value hierarchy table and then into the valuation methodology disclosures.

Equity securities: the cleanest examples of fair value measurements

Publicly traded equity securities are the textbook example of fair value measurements in financial statements because the valuation is straightforward: last quoted price on an active market.

Under U.S. GAAP (ASC 820 and ASC 321), most equity investments (other than those accounted for under the equity method or consolidation) are recorded at fair value with changes in fair value running through earnings. For IFRS filers, IFRS 9 plays a similar role.

In practice, a fair value note might say something like:

“Equity securities classified as trading are measured at fair value using quoted prices in active markets (Level 1). Changes in fair value are recognized in other income (expense).”

A real-world pattern you’ll see:

• The balance sheet shows “Equity securities, at fair value” under current or noncurrent assets.
• The fair value hierarchy table shows these as Level 1 because the inputs are unadjusted quoted prices in active markets.
• The notes disclose the cost basis, fair value, and unrealized gains or losses for the period.

When markets are volatile (think 2022–2024), these Level 1 fair value swings can materially change reported earnings, especially for financial institutions and corporate venture arms.

Authoritative reference: FASB ASC 820 Fair Value Measurement (registration required, but still the primary U.S. source).

Fixed income securities and funds: Level 2 fair value in action

Bonds and fixed income funds give you another rich set of examples of fair value measurements in financial statements, especially for insurers, banks, and large corporates with big cash portfolios.

Unlike listed equities, many bonds don’t trade every day. So companies rely on pricing services, broker quotes, and observable yield curves. That typically lands them in Level 2 of the fair value hierarchy.

A typical disclosure pattern:

• Held-to-maturity securities are carried at amortized cost, but fair value is still disclosed in the notes.
• Available-for-sale or trading securities are carried at fair value on the face of the balance sheet.
• The fair value note explains that pricing is based on quoted prices for similar instruments, matrix pricing, or observable market spreads.

You might see language such as:

“The fair value of corporate debt securities is based on quoted prices for similar securities in active markets, quoted prices for identical or similar securities in markets that are not active, or model-derived valuations with observable inputs (Level 2).”

For 2023–2025, rising and then fluctuating interest rates mean these fair value measurements can drive significant unrealized losses or gains in accumulated other comprehensive income (AOCI), especially for banks and insurers.

For background on how interest rates influence bond fair values, the Federal Reserve’s education materials are useful: https://www.federalreserve.gov/education.htm.

Derivatives: swaps, options, and forward contracts

Derivatives are some of the most technical examples of fair value measurements in financial statements, but they show the hierarchy logic in a very concrete way.

Common instruments:

• Interest rate swaps used to manage exposure to floating or fixed rates
• Foreign currency forwards and swaps used for FX risk management
• Commodity futures and options for energy or raw materials

The fair value is generally determined using discounted cash flow models that rely on observable inputs like forward curves, interest rate curves, and credit spreads. That usually makes them Level 2.

A typical note will:

• Break out derivatives by type (interest rate, FX, commodity)
• Show asset vs. liability fair values by balance sheet line item
• Classify each derivative as Level 2, unless it’s an exchange-traded future (often Level 1)

Example disclosure wording:

“The fair values of derivative instruments are determined using valuation models that utilize observable market inputs, including interest rate curves, foreign currency rates, and commodity prices (Level 2).”

In 2024–2025, with interest rates and FX rates moving more than they did in the low-rate decade, the fair value of these hedging instruments has become more volatile, making derivative notes even more relevant for investors.

For a grounding in derivatives and risk, the SEC’s Office of Investor Education provides accessible material: https://www.investor.gov.

Private equity, venture investments, and other Level 3 assets

If you’re looking for the most judgment-heavy examples of fair value measurements in financial statements, head straight to Level 3. Private equity and venture investments are the poster children here.

These are investments in:

• Startups and privately held companies
• Private equity funds and hedge funds
• Structured products without active markets

Because there are no quoted market prices, companies lean on valuation techniques such as:

• Market approach: using revenue or EBITDA multiples from comparable public companies, adjusted for size and liquidity
• Income approach: discounted cash flow models using management forecasts
• Recent transaction method: using the price of the latest funding round, adjusted if conditions have changed

The notes usually include:

• A Level 3 rollforward showing beginning balance, purchases, sales, transfers, and gains/losses
• A sensitivity analysis describing how changes in discount rates or multiples would change fair value
• Qualitative discussion of unobservable inputs and valuation techniques

This is where 2023–2025 market dynamics really matter. After the 2021–2022 private market boom, many tech and growth investments have required downward fair value adjustments as funding rounds reset and exit timelines lengthen. Those remeasurements go straight through earnings or OCI depending on classification.

IFRS filers rely on IFRS 13 Fair Value Measurement, which provides a global framework similar to ASC 820. The IFRS Foundation has an overview here: https://www.ifrs.org/issued-standards/list-of-standards/ifrs-13-fair-value-measurement/.

Business combinations: contingent consideration and acquired assets

Business combinations offer some of the most interesting examples of fair value measurements in financial statements because almost everything in a deal is measured at fair value on Day 1.

Two standouts:

Contingent consideration (earn-outs)
When a buyer agrees to pay additional amounts if the acquiree hits certain revenue or EBITDA targets, that earn-out is recognized at fair value at the acquisition date.

• The liability is typically Level 3, based on probability-weighted scenarios and discounted cash flows.
• Subsequent changes in fair value often go through earnings, which can make post-deal P&L noisy.

Acquired identifiable intangible assets
Customer relationships, trademarks, developed technology, and in-process R&D are all measured at fair value on acquisition.

• Valuation techniques include relief-from-royalty, multi-period excess earnings, and replacement cost approaches.
• These are almost always Level 3 because they rely on management forecasts and unobservable assumptions.

In the notes, you’ll see tables summarizing:

• The fair value allocation to tangible and intangible assets
• The fair value of contingent consideration and its hierarchy level
• Key assumptions used in valuation models (growth rates, discount rates, churn)

For analysts, these are powerful examples of fair value measurements in financial statements because they reveal management’s view of the economics of a deal, not just the headline purchase price.

Investment property and real estate fair value under IFRS

If you read financial statements from European or global companies reporting under IFRS, you’ll find another set of examples of fair value measurements in financial statements in the investment property line.

Under IAS 40, entities can elect a fair value model for investment property. That means:

• The property is carried at fair value on the balance sheet.
• Changes in fair value go through profit or loss.

Valuation approaches include:

• Income approach using capitalization rates and discounted cash flows
• Market approach based on comparable sales

These are usually Level 3 because capitalization rates, discount rates, and growth assumptions are not directly observable for each property.

The notes often include:

• A reconciliation of beginning and ending investment property fair values
• A description of valuation techniques and significant unobservable inputs
• Sensitivity to changes in cap rates and occupancy

Given the post‑2020 shifts in office demand and 2023–2024 interest rate moves, these real estate fair value measurements have become a focal point for investors trying to understand exposure to commercial property risk.

Financial liabilities at fair value and own credit risk

We tend to think of assets when we talk about fair value, but liabilities produce some of the more counterintuitive examples of fair value measurements in financial statements.

Certain financial liabilities can be designated at fair value through earnings (FVTPL under IFRS, fair value option under U.S. GAAP). These might include:

• Structured notes issued by banks
• Certain long-term debt instruments
• Written options and other derivative liabilities

Valuation techniques mirror those used for similar assets, but with an important twist: own credit risk. If a company’s own credit spreads widen, the fair value of its liabilities can decrease, generating a gain in earnings — even though the company is arguably riskier.

Notes will typically:

• Disclose the portion of fair value change attributable to own credit risk
• Classify the liabilities within the fair value hierarchy (often Level 2)
• Explain the valuation methodology and inputs

This is one of the more debated examples of fair value measurements in financial statements because it can produce headline results that don’t line up neatly with economic intuition.

Fair value hierarchy tables: how the examples fit together

All of these examples of fair value measurements in financial statements ultimately flow into one or more fair value hierarchy tables in the notes.

Those tables typically:

• Group assets and liabilities measured at fair value by class (e.g., trading securities, derivatives, Level 3 investments)
• Show the fair value by Level 1, Level 2, Level 3
• Provide a Level 3 rollforward showing how those balances changed during the period

When you’re reading these tables, a practical way to think about them is:

• Level 1: direct market prices — public equities, exchange-traded funds, listed derivatives
• Level 2: market-based models — bonds, OTC derivatives, some structured products
• Level 3: management-based models — private equity, earn-outs, complex intangibles, investment property

The best way to learn is to pick a large financial institution’s 10‑K and trace each line item from the balance sheet to the fair value note. You’ll quickly see how these different examples of fair value measurements in financial statements are connected and where management judgment really matters.

For a conceptual backdrop, the SEC’s staff accounting bulletins and fair value guidance give helpful color on how regulators think about these measurements: https://www.sec.gov/corpfin/cf-sab-topic-5.

FAQ: examples of fair value measurements in financial statements

Q1. What are the most common examples of fair value measurements in financial statements for nonfinancial companies?
For nonfinancial corporates, the most common examples include equity and bond investments in the treasury portfolio, interest rate and foreign currency derivatives used for hedging, contingent consideration from acquisitions, and sometimes Level 3 investments in private companies or funds. If the company reports under IFRS and owns investment property, that’s another major example.

Q2. Can you give an example of a Level 3 fair value measurement disclosure?
A typical example of a Level 3 note might describe private equity investments valued using discounted cash flows with discount rates between 12% and 18%, long-term growth rates between 2% and 4%, and EBITDA multiples derived from comparable public companies. The disclosure would include a rollforward of beginning and ending balances, purchases, sales, and gains or losses recognized in earnings.

Q3. Are impairments based on fair value considered fair value measurements?
Yes. When a company tests goodwill or long-lived assets for impairment using a fair value approach, it is applying fair value measurement techniques. Even if the asset is not carried at fair value on an ongoing basis, the impairment test itself uses fair value concepts, often through discounted cash flow models or market multiples.

Q4. How do rising interest rates affect examples of fair value measurements in financial statements?
Higher interest rates generally reduce the fair value of fixed-rate bonds and increase discount rates used in valuation models. That can lead to unrealized losses on bond portfolios, lower fair values for Level 3 investments that rely on discounted cash flows, and changes in the fair value of interest rate derivatives. The impact shows up both on the face of the financial statements and in the fair value notes.

Q5. Where can I find real examples of fair value measurements in financial statements to study?
The best approach is to pull recent annual reports or Form 10‑Ks from large banks, insurers, and global corporates on the SEC’s EDGAR system. Look specifically for the “Fair Value Measurements” or “Financial Instruments” note. Those notes provide real examples, including hierarchy tables, valuation methods, and sensitivity analyses that bring the fair value rules to life.