PFRS 13 Part 1 Fair Value Measurement

Question 1

Explain PFRS 13

Answer 1

This standard applies to the fair value measurement, and related disclosures, of an asset, liability or equity when other PFRSs require measurement at fair value or fair value less costs to sell.

This standard does not apply to the following:

a. Share-based payment transactions (PFRS 2);
b. Leases (PFRS 16 Leases); and
c. Measurements that have some similarities to fair value but are not fair value, such as net realizable value in PAS 2 or value in use in PAS 36.

Question 2

Explain PFRS 13

• This standard applies to the — — —, and related —, of an —, — or — when other PFRSs require — at — — or — — less — to —.

This standard does not apply to the following:

a. — — transactions (PFRS 2);
b. — (PFRS — —-); and
c. — that have some — to — — but are not — —, such as — — — in PAS — or value in — in PAS —.

Answer 2

Explain PFRS 13
- This standard applies to the fair value measurement, and related disclosures, of an asset, liability or equity when other PFRSs require measurement at fair value or fair value less costs to sell.

This standard does not apply to the following:

a. Share-based payment transactions (PFRS 2);
b. Leases (PFRS 16 Leases); and
c. Measurements that have some similarities to fair value but are not fair value, such as net realizable value in PAS 2 or value in use in PAS 36.

Question 3

This standard applies to the fair value measurement, and related disclosures, of an asset, liability or equity when other PFRSs require measurement at fair value or fair value less costs to sell.

Answer 3

PFRS 13

Question 4

This standard does not apply to the following:

a. Share-based payment transactions (PFRS 2);
b. Leases (PFRS 16 Leases); and
c. Measurements that have some similarities to fair value but are not fair value, such as net realizable value in PAS 2 or value in use in PAS 36.

Answer 4

PFRS 13

Question 5

What is fair value?

Answer 5

• It is “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.”

The following underlies the definition of fair value:

• It is a market-based measurement, not an entity specific measurement (i.e., fair value measurement does not depend on facts and circumstances surrounding a specific entity).
• This measurement requires the use of assumptions that market participants would undertake when pricing the asset or liability under current market condition, including assumptions about risk.
• This measurement presumes that the entity is a going concern without any intention or need to liquidate, to curtail materially the scale of its operations or to undertake a transaction on adverse terms. Fair value is the price in an orderly transaction and is not, therefore, the amount that an entity would receive or pay in a forced transaction, involuntary liquidation or distress sale. However, fair value reflects the credit quality of the instrument. As a result, an entity’s intention to hold an asset or to settle or otherwise fulfill a liability is not relevant when measuring fair value.

Measurement at fair value is also called “market-to-market” accounting.

Question 6

What is fair value?

• It is “the — that would be — to — an — or — to — a — in an — transaction between market — at the — date.”

The following underlies the definition of fair value:

• It is a — —, not an — — — (i.e., fair value measurement does not depend on facts and circumstances surrounding a specific entity).
• This measurement — the use of — that market participants would — when pricing the — or — under current — —-, including — about —.
• This measurement — that the entity is a — — without any intention or need to —-, to — — the — of its operations or to — a transaction on — terms. Fair value is the — in an orderly transaction and is not, therefore, the — that an entity would — or pay in a — transaction, — liquidation or — sale. However, fair value — the credit — of the —. As a result, an entity’s — to hold an asset or to settle or otherwise fulfill a liability is not — when measuring fair value.

Measurement at fair value is also called “—” —.

Answer 6

• It is “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.”

The following underlies the definition of fair value:

• It is a market-based measurement, not an entity specific measurement (i.e., fair value measurement does not depend on facts and circumstances surrounding a specific entity).
• This measurement requires the use of assumptions that market participants would undertake when pricing the asset or liability under current market condition, including assumptions about risk.
• This measurement presumes that the entity is a going concern without any intention or need to liquidate, to curtail materially the scale of its operations or to undertake a transaction on adverse terms. Fair value is the price in an orderly transaction and is not, therefore, the amount that an entity would receive or pay in a forced transaction, involuntary liquidation or distress sale. However, fair value reflects the credit quality of the instrument. As a result, an entity’s intention to hold an asset or to settle or otherwise fulfill a liability is not relevant when measuring fair value.

Measurement at fair value is also called “market-to-market” accounting.

Question 7

It is “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.”

Answer 7

Fair value

Question 8

It is a market-based measurement, not an entity specific measurement (i.e., fair value measurement does not depend on facts and circumstances surrounding a specific entity).

Answer 8

Fair value

Question 9

This measurement requires the use of assumptions that market participants would undertake when pricing the asset or liability under current market condition, including assumptions about risk.

Answer 9

Fair value

Question 10

This measurement presumes that the entity is a going concern without any intention or need to liquidate, to curtail materially the scale of its operations or to undertake a transaction on adverse terms. Fair value is the price in an orderly transaction and is not, therefore, the amount that an entity would receive or pay in a forced transaction, involuntary liquidation or distress sale. However, fair value reflects the credit quality of the instrument. As a result, an entity’s intention to hold an asset or to settle or otherwise fulfill a liability is not relevant when measuring fair value.

Answer 10

Fair value

Question 11

It is also called “market-to-market” accounting.

Answer 11

Fair value

Question 12

What are the four (4) requirements on fair value measurement?

Answer 12

• PFRS 13 requires an entity to determine the following when measuring fair value:

1) The particular asset or liability being measured.

2) The market in which an orderly transaction would take place the asset or liability.

3) The appropriate valuation technique(s) to be used in measuring fair value.

4) For a non-financial asset, the highest and best use of the asset and whether the asset is used in combination with other assets or on a stand-alone basis.

Question 13

What are the four (4) requirements on fair value measurement?

• PFRS 13 requires an entity to — the following when — — —:

1) The — — or — being —.

2) The — in which an orderly transaction would take — the — or —.

3) The — — —(s) to be used in — fair value.

4) For a non-financial asset, the — and — — of the — and whether the asset is used in — with — — or on a — basis.

Answer 13

• PFRS 13 requires an entity to determine the following when measuring fair value:

1) The particular asset or liability being measured.

2) The market in which an orderly transaction would take place the asset or liability.

3) The appropriate valuation technique(s) to be used in measuring fair value.

4) For a non-financial asset, the highest and best use of the asset and whether the asset is used in combination with other assets or on a stand-alone basis.

Question 14

What is unit of account?

Answer 14

• It is “the level at which an asset or a liability is aggregated or disaggregated in a PFRS for recognition purposes.”

Question 15

What is unit of account?

It is “the — at which an — or a — is — or — in a — for — —.”

Answer 15

It is “the level at which an asset or a liability is aggregated or disaggregated in a PFRS for recognition purposes.”

Question 16

• It is “the level at which an asset or a liability is aggregated or disaggregated in a PFRS for recognition purposes.”

Answer 16

Unit of account

Question 17

What is principal market?

Answer 17

It is “the market with the greatest volume and level of activity for the asset or liability.

Question 18

What is principal market?

It is “the — with the greatest — and — of — for the — or —.

Answer 18

It is “the market with the greatest volume and level of activity for the asset or liability.

Question 19

It is “the market with the greatest volume and level of activity for the asset or liability.

Answer 19

Principal market

Question 20

What is most advantageous market?

Answer 20

It is “the market that maximizes the amount that would be received to sell the asset or minimizes the amount that would be paid to transfer the liability, after taking into account transaction costs and transport costs.”

Question 21

What is most advantageous market?

• It is “the — that — the — that would be — to — the — or — the — that would be — to — the —, after taking into account — costs and — costs.”

Answer 21

It is “the market that maximizes the amount that would be received to sell the asset or minimizes the amount that would be paid to transfer the liability, after taking into account transaction costs and transport costs.”

Question 22

It is “the market that maximizes the amount that would be received to sell the asset or minimizes the amount that would be paid to transfer the liability, after taking into account transaction costs and transport costs.”

Answer 22

Most advantageous market