Ifrs 13 Fv

Question 1

Fair Value

Answer 1

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date

Question 2

Market participants

Answer 2

Knowledgeable 3rd parties who would take into account conditions locations and restrictions on use

Not forced into transactions

Question 3

Approaches

Answer 3

Market approach - recent sales price

Cost approach - based on replacement cost

Income approach- based on financial forecast

Question 4

Price

Answer 4

Fv is market based measurement made using observable data from active markets

Question 5

Active market

Answer 5

Where transaction occurs frequently

Question 6

Inputs into valuation techniques in to 3 levels

Answer 6

LEVEL 1 - quoted prices for identical assets in active markets

LEVEL 2 - observable prices that are not level 1 inputs ( similar assets in local markets, identical assets in less active markets, observable inputs that are not prices

LEVEL 3 - unobservable. Cash or profit forecasts.

Question 7

Principal market

Answer 7

Market with greatest activities for the asset or liability being measured

( can differ between entities)

Question 8

Most advantageous market

Answer 8

If principal market is not available use most advantageous market

One that maximizes the net amount received from selling an asset - decided based on which market is most advantageous

Question 9

Non financial assets

Answer 9

PPE

Intangible assets

Question 10

Financial assets include

Answer 10

Contractual rights to receive cash

Investment in equity shares

Question 11

Fv of non financial assets

Answer 11

Should be based on highest and best use

Highest and best use - use that a market participant would adopt in order to maximize its value

Current use is highest and best use

Should be

Legally permissible ( even if not approved)
Physically possible
Financially feasible

Question 12

Questions ( 22) non financial asset with alternative

Answer 12

Based on highest and best use as per market participants (entity intention does not matter)

Fv=FV- tax credits

Question 13

As 22 a (ii)

Preferred shares and ordinary shares

Answer 13

Market based approach

Take transaction price of identical or similar asset and adjust

Adjustment

1. Reflect priority of liquidity of preferred shares on liquidity
2. Acknowledge benefit associated with control

Etc.

Question 14

Use of fv in financial reporting ( 22b)

Answer 14

IFRS utilize FV very frequently but not necessarily for all assets and liabilities. F/s May measure items like inventory at cost

IFRS 9 FI

…….