Assume the role of a staff auditor assigned to audit the financing cycle for Pear Computer’s annual audit. During the course of the audit, you discover a footnote revealing that “for many assets and liabilities, we have adopted the Fair Value Option in accordance with SFAS 159.”

Required:
a. What is the definition of fair value under SFAS 159?
b. Define a financial asset.
c. Define a financial liability.
d. List some of the additional audit steps required fair value is used.