IFRS 13 Flashcards
What is fair value?
Price received to sell an asset or paid to transfer liability in orderly transactions between market participants at measurement date
Approaches to fair value?
Market - recent sales price
Cost - replacement cost
Income - financial forecasts
Active market price?
Where transactions for liability or asset occur frequently
Level 1 active market?
Inputs are quoted for identical assets in active markets
Example of level 1 active market?
Equity shares in a listed entity
Level 2 active market?
Observable prices not level 1 input
Interest rates
Quoted prices for similar assets in active markets
Quoted prices for identical assets in less active markets
Example of level 2 active market?
Buildings held and used
Level 3 active market?
Inputs are unobservable - including cash or profit forecasts using entity’s own data
What causes change from level 2 to level 3?
Significant adjustments to a level 2 input
What are principal markets?
Greatest activity for asset/liability being measured
Differ between entities
Must be able to access principal market at measurement date
Most advantageous market?
Maximise net amount received from selling an asset
Maximise amount paid to transfer the liability
Fair value basis of a non-financial asset?
Based on highest/best use of:
Physically possible
Legally permissible
Financially feasible
Conceptual framework and fair value?
Relevant - Measure at FV
Faithful representation
