Edesa Biotech, Inc.EDSA

Edesa Biotech, Inc. Fair Value Disclosure

10-KFiled Nov 30, 20182 min read
10.
Fair Value of Financial Instruments
 
The Company uses the fair value measurement framework for valuing financial assets and liabilities measured on a recurring basis in situations where other accounting pronouncements either permit or require fair value measurements.
 
Fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The carrying value of certain financial instruments such as accounts receivable, accounts payable, accrued liabilities, and deferred revenue approximates fair value due to the short-term nature of such instruments. Short-term investments in U.S. Treasury Bills are recorded at amortized cost, which approximates fair value.
 
The Company follows the fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value:
 
 
Level 1:
Quoted prices in active markets for identical or similar assets and liabilities. 
 
Level 2:
Quoted prices for identical or similar assets and liabilities in markets that are not active or observable inputs other than quoted prices in active markets for identical or similar assets and liabilities. 
 
Level 3:
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. 
 
The Company reports its short-term investments in U.S. Treasury Bills at fair value using Level 1 inputs in the fair value hierarchy.
 
The following table summarizes fair values for those assets and liabilities with fair value measured on a recurring basis.
 
 
 
Fair Value Measurements Using
 
 
 
 
 
 
Quoted Prices in

Active Markets

for Identical

Instruments

(Level 1)
 
 
Significant

Other

Observable

Inputs

(Level 2)
 
 
Significant

Unobservable

Inputs

(Level 3)
 
 
Total Fair Value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
September 30, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Short-term investments in U.S. Treasury Bills
 
$
6,078,031
 
 
$
-
 
 
$
-
 
 
$
6,078,031
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
September 30, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Short-term investments in U.S. Treasury Bills
 
$
1,994,401
 
 
$
-
 
 
$
-
 
 
$
1,994,401
 

Historical Timeline

Fiscal YearFiled
2018Nov 30, 2018Showing above
2017Dec 1, 2017
2016Dec 14, 2016

About Fair Value Disclosures

Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.

Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.

Other Available Disclosures

Income TaxesRevenueEarnings Per SharePP&EGoodwill & IntangiblesLeasesCommitmentsNew Standards