Note 2 - Significant Accounting Policies: Fair Value of Financial Instruments and Fair Value Measurements (Policies)

3 Months Ended

Mar. 31, 2016

Policies

Fair Value of Financial Instruments and Fair Value Measurements

Fair value of Financial Instruments and Fair Value Measurements

ASC 820, “Fair Value Measurements and Disclosures”, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

Level 1

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

The Company’s financial instruments consist principally of cash, accounts payable, accrued liabilities, loan payable to a related party and promissory notes payable. Pursuant to ASC 820 and ASC 825, “Financial Instruments”, the fair value of our cash equivalents is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The Company believes that the recorded values of all of the other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

Assets and liabilities measured at fair value on a recurring and non-recurring basis consist of the following at March 31, 2016:

			Fair Value Measurements at March 31, 2016
	Carrying Value at March 31, 2016		(Level 1)		(Level 2)		(Level 3)
Embedded conversion option liability	$	2,287,496	$	-	$	2,287,496	$	-

The following is a summary of activity of Level 2 assets and liabilities for the period ended March 31, 2016:

Embedded conversion option liability
Balance – January 1, 2016	$	78,713
Additions		87,011
Change in fair value		2,121,772
Balance – March 31, 2016	$	2,287,496

Changes in fair value of the embedded conversion option liability are included in Other Income (Expenses) in the accompanying Condensed Consolidated Statements of Operations.

EMAV Holdings, Inc. 10-Q