IFRS 13 - Fair Value Measurements

Question 1

What is a Level 1,2,3 Instrument

Answer 1

Level 1 - Observable Data Identical
Level 2 - Observable Data Similar (Level of Subjectivity)
Level 3 - No Observable Data (High Degree of Subjectivity, May not observe all inputs)

As we progress we see level of risk in measurement increasing and becoming more subjective

Question 2

What if asset is traded in multiple markets

Answer 2

Do not base measurement on the most advantageous market, but use the most liquid market which gives a more realistic indication of the price

Question 3

How should we review companies with Level 2 and 3 Assets

Answer 3

Use sensitivity analysis in assessing performance

Question 4

How do you define an ‘Active’ market

Answer 4

A market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis

Question 5

How do we measure fair value with regard to transaction and transportation costs?

Answer 5

Selling price less transportation costs

Question 6

How do we measure most advantageous market value with regard to transaction and transportation costs?

Answer 6

The market which gives the greatest market value when adjusting for transaction and transportation costs