WEEK 3 (Measurement) Flashcards
When do we measure financial statement elements?
On initial recognition or subsequent valuation
Measurement categorizations
Cost-based measures (historical cost), current value measures (fair value), Hybrid measures (both together)
Measurement techniques
Income models, market models, cost models
What is the income model?
PV and cash flows
What is the market model?
Using publicly available values from similar market transactions
What is the cost model?
Reflects the amount required to replace an assets service capacity
What are the three components of measurement?
Input -> Model -> Output
Inputs for income-based models
Estimates of cash flows, time value of money, uncertainty or risk
Disclosures relating to measurements
Sources of measurement uncertainty, accounting policies related to measurement, Assumptions made about the future, Information regarding the softness of numbers
What is fair value under IFRS
Exit price
What are the conditions of the market-based approach in IFRS 13
- Item being measured
- Nature
- Condition
- Location - How the item would/could be used
- the highest and best use not how it is currently being used
- needs to be physically, legally, and financially possible - the market
- the valuation technique
What is the IFRS 13 Fair value hierarchy
Ranking according to objectivity of inputs (level 1, 2, and 3)
What is value in use?
Entity-specific measure based on the entity’s plans for using the assets, not the market participant view (measured through the discounted cash flow model)
