ACFR FY 2023 Final - Flipbook - Page 87
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 principlesÿ 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 accessÿ
Any asset with an actively traded daily closing price will be classioed 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 indirectlyÿ Inputs to the valuation of the entire term of the
asset or liabilityÿ
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 2ÿ 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 inputÿ
Level 3: Inputs to the valuation methodology are unobservable and signiocant to the fair value
measurementÿ
As a rule, Level 3 inputs are difocult to obtain on a regular basis and it requires veriocation from
an outside party, such as an accountant or an appraisal, to validate the valuationÿ
Debt and equity securities categorized as Level 1 are valued based on prices quoted in active
markets for those securities. Debt securities classioed as Level 2 are valued using a matrix yield
curve that values securities based on their relationship to benchmark quoted prices and credit
spreadsÿ Equities categorized as a Level 2 are valued using a multifactor model, including price,
sector indices, and currency fluctuationsÿ
Debt and equity securities classioed in Level 1 are valued using prices quoted in active markets
for those securities. Currently, the City does not have any debt obligations classioed in Level 3.
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Annual Comprehensive Financial Report | September 30, 2023
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