SMITH MIDLAND CORP Fair Value Disclosure
7. FAIR VALUE DISCLOSURES
The Company applies the guidance that is codified under ASC 820-10 related to assets and liabilities recognized or disclosed in the financial statements at fair value on a recurring basis. ASC 820-10 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. The provisions of ASC 820-10 only apply to the Company’s investment securities, which are carried at fair value.
ASC 820-10 clarifies that fair value is an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants based on the highest and best use of the asset or liability. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability. ASC 820-10 requires valuation techniques to measure fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs. These inputs are prioritized as follows:
Fair Value Hierarchy | Inputs to Fair Value Methodology |
Level 1 | Quoted prices in active markets for identical assets or liabilities |
Level 2 | Quoted prices for similar assets or liabilities; quoted markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the financial instrument; inputs other than quoted prices that are observable for the asset or liability; or inputs that are derived principally from, or corroborated by, observable market information |
Level 3 | Pricing models, discounted cash flow methodologies, or similar techniques and at least one significant model assumption is unobservable or when the estimation of fair value requires significant management judgment |
The Company categorizes a financial instrument in the fair value hierarchy based on the lowest level of input that is significant to its fair value measurement.
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| As of December 31, 2021 |
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| Quoted Market Prices in Active Markets (Level 1) |
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| Internal Models with Significant Observable Market Parameters (Level 2) |
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| Internal Models with Significant Unobservable Market Parameters (Level 3) |
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| Total Fair Value Reported in Financial Statements |
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Mutual Funds |
| $ | — |
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| $ | — |
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| $ | — |
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| $ | — |
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| As of December 31, 2020 |
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| Quoted Market Prices in Active Markets (Level 1) |
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| Internal Models with Significant Observable Market Parameters (Level 2) |
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| Internal Models with Significant Unobservable Market Parameters (Level 3) |
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| Total Fair Value Reported in Financial Statements |
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Mutual Funds |
| $ | 1,228 |
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| $ | — |
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| $ | — |
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| $ | 1,228 |
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2021 | Mar 31, 2022 | Showing above |
| 2020 | Mar 30, 2021 | |
| 2019 | Mar 26, 2020 | |
| 2018 | Mar 26, 2019 | |
| 2017 | Mar 29, 2018 | |
| 2016 | Mar 30, 2017 | |
| 2015 | Mar 28, 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.