ACFR FY 2022 FINAL BOOK - Flipbook - Page 82
FINANCIAL SECTION
City of Eustis, Florida
NOTES TO FINANCIAL STATEMENTS
Note 5 - Cash, Cash Equivalents, and Investments (Continued)
Fair Value of Investments
The City measures and records its investments using fair value measurement guidelines established
by generally accepted accounting principles� These guidelines recognize a three-tiered fair value
hierarchy, as follows:
Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or
liabilities in active markets that the plan can access�
Any asset with an actively traded daily closing price will be classified as a Level 1 input�
Level 2: Inputs are inputs (other than quoted prices included within Level 1) observable for the
asset or liability, either directly or indirectly� Inputs to the valuation of the entire term of the
asset or liability�
As a rule, if an asset or liability does not fall into the requirements of a Level 1 or Level 3 input,
it would default to Level 2� With Level 2 inputs, data can be easily obtained to support the valuation, even though it is not as easily obtained as a Level 1 input�
Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value
measurement�
As a rule, Level 3 inputs are difficult to obtain on a regular basis and it requires verification from
an outside party, such as an accountant or an appraisal, to validate the valuation�
Debt and equity securities categorized as Level 1 are valued based on prices quoted in active
markets for those securities� Debt securities classified as Level 2 are valued using a matrix yield
curve that values securities based on their relationship to benchmark quoted prices and credit
spreads� Equities categorized as a Level 2 are valued using a multifactor model, including price,
sector indices, and currency fluctuations�
Debt and equity securities classified in Level 1 are valued using prices quoted in active markets
for those securities� Currently, the City does not have any debt obligations classified in Level 3�
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Annual Comprehensive Financial Report | September 30, 2022