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    Fair Value Measurement IFRS 13 (Effective From 1.1.2013)

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    Duyen Huynh
    IFRS 13 establishes a single framework for measuring fair value and requires certain disclosures about fair value measurements. It defines fair value as the price received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements can be categorized into a three-level hierarchy based on the type of inputs used. Level 1 inputs are quoted prices in active markets, Level 2 are observable inputs such as interest rates, and Level 3 are unobservable inputs developed using the reporting entity's own data. IFRS 13 describes common valuation techniques used to estimate fair value and requires entities to disclose information about fair value measurements and the related valuation techniques.

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    Fair Value Measurement IFRS 13 (Effective From 1.1.2013)

    Uploaded by

    Duyen Huynh
    62 views4 pages
    IFRS 13 establishes a single framework for measuring fair value and requires certain disclosures about fair value measurements. It defines fair value as the price received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements can be categorized into a three-level hierarchy based on the type of inputs used. Level 1 inputs are quoted prices in active markets, Level 2 are observable inputs such as interest rates, and Level 3 are unobservable inputs developed using the reporting entity's own data. IFRS 13 describes common valuation techniques used to estimate fair value and requires entities to disclose information about fair value measurements and the related valuation techniques.

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    fair value under ifrs

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    FairValue_IFRS

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    IFRS 13 establishes a single framework for measuring fair value and requires certain disclosures about fair value measurements. It defines fair value as the price received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements can be categorized into a three-level hierarchy based on the type of inputs used. Level 1 inputs are quoted prices in active markets, Level 2 are observable inputs such as interest rates, and Level 3 are unobservable inputs developed using the reporting entity's own data. IFRS 13 describes common valuation techniques used to estimate fair value and requires entities to disclose information about fair value measurements and the related valuation techniques.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    62 views4 pages

    Fair Value Measurement IFRS 13 (Effective From 1.1.2013)

    Uploaded by

    Duyen Huynh
    IFRS 13 establishes a single framework for measuring fair value and requires certain disclosures about fair value measurements. It defines fair value as the price received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements can be categorized into a three-level hierarchy based on the type of inputs used. Level 1 inputs are quoted prices in active markets, Level 2 are observable inputs such as interest rates, and Level 3 are unobservable inputs developed using the reporting entity's own data. IFRS 13 describes common valuation techniques used to estimate fair value and requires entities to disclose information about fair value measurements and the related valuation techniques.

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    of 4

    Fair Value Measurement IFRS 13

    (effective from 1.1.2013)


    IFRS 13: [IFRS 13:1]
    defines fair value
    sets out in a single IFRS a framework for measuring fair value
    requires disclosures about fair value measurements.
    IFRS 13 applies when another IFRS requires or permits fair value
    measurements or disclosures about fair value measurements
    except for: [IFRS 13:5-7]
    share-based payment transactions within the scope of IFRS 2
    Share-based Payment
    leasing transactions within the scope of IAS 17 Leases
    measurements that have some similarities to fair value but that
    are not fair value, such as net realisable value in IAS 2
    Inventories or value in use in IAS 36 Impairment of Assets.

    Some main concepts

    Fair value: 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.
    Active market: A market in which transactions for the asset or
    liability take place with sufficient frequency and volume to provide
    pricing information on an ongoing basis.
    Exit price: The price that would be received to sell an asset or paid to
    transfer a liability.

    Fair value hierarchy (IFRS13, IFRS 7)


    The hierarchy categorises the inputs used in valuation techniques into
    three levels.
    The hierarchy gives the highest priority to (unadjusted) quoted
    prices in active markets for identical assets or liabilities and the
    lowest priority to unobservable inputs. [IFRS 13:72]
    Level 1 inputs
    Level 1 inputs are quoted prices in active markets for identical assets
    or liabilities that the entity can access at the measurement date. [IFRS 13:76]
    A quoted market price in an active market provides the most reliable
    evidence of fair value and is used without adjustment to measure fair value
    whenever available, with limited exceptions. [IFRS 13:77]
    If an entity holds a position in a single asset or liability and the asset or liability
    is traded in an active market, the fair value of the asset or liability is measured
    within Level 1 as the product of the quoted price for the individual asset or
    liability and the quantity held by the entity, even if the market's normal daily
    trading volume is not sufficient to absorb the quantity held and placing orders
    to sell the position in a single transaction might affect the quoted price. [IFRS
    13:80]

    Fair value hierarchy, cont.


    Level 2 inputs
    Level 2 inputs are inputs other than quoted market prices included
    within Level 1 that are observable for the asset or liability, either
    directly or indirectly. [IFRS 13:81]
    Level 2 inputs include:
    quoted prices for similar assets or liabilities in active markets
    quoted prices for identical or similar assets or liabilities in markets
    that are not active
    inputs other than quoted prices that are observable for the asset or
    liability, for example
    interest rates and yield curves observable at commonly quoted intervals
    implied volatilities
    credit spreads

    inputs that are derived principally from or corroborated by observable


    market data by correlation or other means ('market-corroborated
    inputs').

    Fair value hierarchy, cont.

    Level 3 inputs
    Level 3 inputs inputs are unobservable inputs for the asset or
    liability. [IFRS 13:86]
    Unobservable inputs are used to measure fair value to the extent
    that relevant observable inputs are not available, thereby
    allowing for situations in which there is little, if any, market
    activity for the asset or liability at the measurement date.
    An entity develops unobservable inputs using the best
    information available in the circumstances, which might
    include the entity's own data, taking into account all information
    about market participant assumptions that is reasonably available.
    [IFRS 13:87-89]

    Valuation techniques
    The objective of using a valuation technique is to estimate the price
    at which an orderly transaction to sell the asset or to transfer the
    liability would take place between market participants and the
    measurement date under current market conditions. Three widely
    used valuation techniques are: [IFRS 13:62]
    market approach uses prices and other relevant information
    generated by market transactions involving identical or comparable
    (similar) assets, liabilities, or a group of assets and liabilities (e.g. a
    business)
    cost approach reflects the amount that would be required
    currently to replace the service capacity of an asset (current
    replacement cost)
    income approach converts future amounts (cash flows or
    income and expenses) to a single current (discounted) amount,
    reflecting current market expectations about those future amounts.

    Disclosure objective

    IFRS 13 requires an entity to disclose information that helps users of


    its financial statements assess both of the following: [IFRS 13:91]
    for assets and liabilities that are measured at fair value on a
    recurring or non-recurring basis in the statement of financial
    position after initial recognition, the valuation techniques and inputs
    used to develop those measurements
    for fair value measurements using significant unobservable inputs
    (Level 3), the effect of the measurements on profit or loss or other
    comprehensive income for the period.
    More details, please see fro example http://www.iasplus.com

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