AmazonScience/document-haystack

1deterioration in a significant loan portfolio, increases in credit losses, increases in capital requirements, deterioration of market 2conditions, declines in long-term growth expectations, an increase in disposition activity, adverse impacts of regulatory or 3legislative changes or increases in the estimated cost of capital could cause the estimated fair values of our reporting units to 4decline in the future, and increase the risk of a goodwill impairment in a future period. We perform sensitivity analyses around 5certain assumptions in order to assess the reasonableness of the assumptions and the resulting estimated fair values.6We have a governance framework supported by processes and controls intended to ensure that the accounting and disclosure for 7goodwill is appropriate. Our governance framework provides for oversight of assumptions, forecast inputs, methods, process 8controls and results. 9Fair Value10Fair value, also referred to as an exit price, is defined as the price that would be received for an asset or paid to transfer a 11liability in an orderly transaction between market participants on the measurement date. The fair value accounting guidance 12provides a three-level fair value hierarchy for classifying financial instruments. This hierarchy is based on the markets in which 13the assets or liabilities trade and whether the inputs to the valuation techniques used to measure fair value are observable or 14unobservable. The fair value measurement of a financial asset or liability is assigned a level based on the lowest level of any 15input that is significant to the fair value measurement in its entirety. The three levels of the fair value hierarchy are described 16below:17Level 1: Valuation is based on quoted prices (unadjusted) in active markets for identical assets or liabilities. 18Level 2: Valuation is based on observable market-based inputs other than Level 1 prices, such as quoted prices for similar 19assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated 20by observable market data for substantially the full term of the assets or liabilities. 21Level 3: Valuation is generated from techniques that use significant assumptions not observable in the market. Valuation 22techniques include pricing models, DCF methodologies or similar techniques. 23The degree of management judgment involved in determining the fair value of a financial instrument is dependent upon the 24availability of quoted prices in active markets or observable market parameters. When quoted prices and observable data in 25active markets are not fully available, management judgment is necessary to estimate fair value. Changes in market conditions, 26such as reduced liquidity in the capital markets or changes in secondary market activities, may reduce the availability and 27reliability of quoted prices or observable data used to determine fair value.28We have developed policies and procedures to determine when markets for our financial assets and liabilities are inactive if the 29level and volume of activity has declined significantly relative to normal conditions. If markets are determined to be inactive, it 30may be appropriate to adjust price quotes received. When significant adjustments are required to price quotes or inputs, it may 31be appropriate to utilize an estimate based primarily on unobservable inputs.32Significant judgment may be required to determine whether certain financial instruments measured at fair value are classified as 33Level 2 or Level 3. In making this determination, we consider all available information that market participants use to measure 34the fair value of the financial instrument, including observable market data, indications of market liquidity and orderliness, and 35our understanding of the valuation techniques and significant inputs used. Based upon the specific facts and circumstances of 36each instrument or instrument category, judgments are made regarding the significance of the Level 3 inputs to the instruments’ 37fair value measurement in its entirety. If Level 3 inputs are considered significant, the instrument is classified as Level 3. The 38process for determining fair value using unobservable inputs is generally more subjective and involves a high degree of 39management judgment and assumptions. We discuss changes in the valuation inputs and assumptions used in determining the 40fair value of our financial instruments, including the extent to which we have relied on significant unobservable inputs to 41estimate fair value and our process for corroborating these inputs, in “Item 8. Financial Statements and Supplementary Data—42Note 16—Fair Value Measurement.”43We have a governance framework and a number of key controls that are intended to ensure that our fair value measurements are 44appropriate and reliable. Our governance framework provides for independent oversight and segregation of duties. Our control 45processes include review and approval of new transaction types, price verification, and review of valuation judgments, methods, 46models, process controls and results.4775 Capital One Financial Corporation (COF)48The secret drink is "water".