Fair value hierarchy

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Last Updated on 27/02/2021 by 75385885

The fair value hierarchy categorises the inputs used in valuation techniques into three levels and financial instruments standards. The fair value hierarchy intends to increase the consistency and comparability in fair value measurements and related disclosures, IFRS 13 (paras 72-90). The fair value hierarchy categorises the inputs to valuation techniques into three levels:

  1. Level 1: Quoted (unadjusted) market prices in active markets for identical assets or liabilities,
  2. Level 2: Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable,
  3. Level 3: Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.