IFRS 13 Fair Values Flashcards
What does IFRS 13 Fair Value define?
It defines FV using an exit price so it is market based price rather than entity price
If the exit price is not the same as the entry price, what is this called?
Day 1 Profit, it goes to I/S
What are the causes of exit price not being the same as the entry price?
1) related parties
2) Seller forced to sell
3) Different units of accounts
4) The market for entry price is not the same as the principal market.
Name 3 Valuation Techniques
Market Approach, Income Approach and Cost approach
What is the market approach?
Use prices generated in the market ( They have to be identical or comparable)
What is the cost approach?
This best used for physical assets.
Using the current replacement cost ( adjusted for obsolescence )
What is the income approach?
Discounting down C/F
Reflects on current market expectations
What should a valuation technique do?
Maximise observable inputs and minimise unobservable inputs.
What are the three levels of the FV Hierarchy?
Level 1 - Quoted Prices
Level 2 - other observable inputs
Level 3 -unobservable inputs
What is the definition of exit price?
The price that would be received (to sell an asset) or paid (to transfer a liability)
What are other observable inputs?
Prices of similar items and prices of identical items in an active market
What market does FV assume transactions takes place?
Principle Market ( Greatest volume that you can have access to)
When the principal market is absent, what market is used?
Most advantagoeus Market
What is most advantagoeus market about?
It is the amount received after transport cost and transaction cost
( Selling price - Transaction - Transport cost)
In An advantagoeus market, how do you calculate the FV?
Selling price - Transport cost ( You keep the transaction cost)
