Topic 11- Other standards IFRS 13- Fair Value Measurement Flashcards
what does IFRS 13 Fair value do
it provides a further method of valuing assets.
IFRS 13 establishes a hierarchy that categorises the inputs to valuation techniques used to measure fair value as follows
what is level 1 input
Level 1 Quoted prices in active markets for identical items
i.e. Observable market prices
what is level 2 input
Level 2 Quoted prices for similar items or identical items in inactive markets
i.e. these are also observable. However, rather than having an active market, there may be a market for similar sort of assets which can be used as a benchmark and make adjustment to the valuation to ensure it’s more accurate to the asset
what is level 3 input
Level 3 Unobservable inputs, based on best available information
i.e. we use the best information we have available to measure the asset
under what assumptions is the asset valued using FV
An entity shall measure the fair value of an asset or a liability using the assumptions that market participants
would use when pricing the asset or liability, assuming that market participants act in their economic best
interest.
An entity shall measure the fair value of an asset or a liability using the assumptions that market participants
would use when pricing the asset or liability, assuming that market participants act in their economic best
interest.
What are the considerations on measurement
Considerations on measurement include:
- The condition and location of an asset
- If there’s any restrictions on the asset in relation to the use of the asset or if the buyer went on to sell the asset.
IFRS 13 does not apply to which standards
Leases
IAS 2 Inventories (some things)
IAS 8 Accounting Policies, changes in accounting estimates and errors
IAS 36 Impairment
What is the def of FV
FV is the price that would be received to sell an asset or paid to transfer a liabiity in an orderly transaction (Commercial) between market participants at the measurement date (i.e. an exit price)
