Reference no: EM133160305

Question - Arsenio Investment, Inc. is a private company that invests in various financial and non-financial assets for its shareholders. Assets are measured at fair value at each reporting date. The chief investment officer (CIO) of the company has finalized the fair values for a number of investments as of December 31, 2021.  Arsenio has an investment in 100,000 shares of common stock of a private company.  There are no market quotes with respect to the fair value of the common stock; however, the private company's operations, size and performance are similar to a company whose stock is traded on the NASDAQ.  The CIO has taken some of the similar company's market metrics, such as the price/earnings ratio of the common stock, a discounted earnings calculation and a few others, and has adjusted these metrics to reflect performance that he believes is better and more accurate of the metrics with which to value the private company and related investment. However, these revised metrics do not agree with the metrics of the similar public company or other companies in this industry.

For each of the above investments, evaluate the CIO's valuation approach. PLEASE use the Codification to provide support for your response.

If you agree, state your reasons.  Also, determine if there are other valuation approaches that could be used. (Explain your reasoning and provide support).

If you disagree, state your reasons and suggest either a different approach or how you might change the current approach and what, if any, adjustments should be made to the valuation. (Explain your reasoning and provide support).

For each of the above investments, determine the classification according to the fair value hierarchy.