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Ifrs 13

IFRS 13 defines fair value measurement and establishes a framework for measuring fair value. It applies when other IFRS standards require or permit fair value measurements. IFRS 13 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 is a market-based measurement rather than an entity-specific measurement. The standard also provides guidance on valuation techniques, the fair value hierarchy, and required disclosures.

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1K views11 pages

Ifrs 13

IFRS 13 defines fair value measurement and establishes a framework for measuring fair value. It applies when other IFRS standards require or permit fair value measurements. IFRS 13 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 is a market-based measurement rather than an entity-specific measurement. The standard also provides guidance on valuation techniques, the fair value hierarchy, and required disclosures.

Uploaded by

mulualem
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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IFRS 13

FAIR VALUE MEASUREMENT

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PURPOSES

To define fair value


To set out in a single IFRS a framework
for measuring fair values,
 Defining the disclosures necessary to
understand how the fair value
measurements were derived
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SCOP

 Applies to IFRSs that require or permit fair value


measurements or disclosures about fair value
measurements (except for IFRS 2, IAS 2, IAS 17
and IAS 36)
 IFRS 13 does not order when fair value
measurements should be used – but prescribe
how to measure fair value
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Key definition

 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’.
 This is sometimes referred to as an ‘exit price’.
 The key in IFRS 13 is that fair value is a market
based measurement, not an entity-specific
measurement.
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An entity should take into account the characteristics
of the asset or liability if market participants would
take those characteristics into account when pricing
the asset or liability
 Such characteristics include:
o The condition
o Location of the asset
o Restrictions, if any, on the sale or use of the asset
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A fair value measurement assumes that the
transaction takes place either:
in the principal market for the asset or
liability; or
 in the absence of a principal market, in
the most advantageous market for the
asset or liability

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 A fair value measurement assumes that the asset or
liability is exchanged in an orderly transaction under
current market conditions at the measurement date
 An ‘orderly transaction’ means that it is not a
forced transaction.

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STEP to FVM

Identify the item , asset and liability


Identify the unit of account (measured
for a single item or in aggregate )
Identify the market and participant

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Choose valuation approach

1. Market approach uses prices generated by


market transactions
2. Cost approach determines the value that
reflects current replacement cost
3. Income approach converts future amounts
to a single (present value) amount
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Determined fair value
 We can determined fair value in 3 levels
Level one quoted un adjusted price, there is a market for the item

Level two quoted adjusted price, there is a market for the similar item

Level three unobservable, there is no market for the item and similar
items also , we use best info available

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Disclosure
Valuation techniques and inputs used to develop fair
value measurements (including the level of the hierarchy
within which the fair value measurements are
categorized)
Effect of measurements on profit/loss for the reporting
period for recurring fair value measurements
 Additional disclosure requirements, particularly for fair
value measurements based on Level 2 and Level 3 inputs
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