Fair value measurement and disclosure

Fair value measurement and disclosure – The following are some examples of assets and liabilities that fall within the scope of IFRS 13 for the purpose of measurement and/or disclosure.

IFRS=== Financial reporting item Measurement Disclosure
[IAS 39] Financial instruments available-for-sale or held for trading (recurring fair value measurements)

Fair value measurement and disclosure

Fair value measurement and disclosure

 

 

[IAS 39 /

IFRS 7]

Financial instruments held-to-maturity subsequent to initial recognition1 at amortised costs (so not part of IFRS 13.
[IFRS 1] Fair value as deemed cost by a first-time adopter of IFRS (e.g. for property, plant and equipment) in the year of adoption of IFRS

Fair value measurement and disclosure

Fair value measurement and disclosure

Fair value measurement and disclosure

 

 

[IFRS 3] Fair value used to initially measure non-financial assets and non-financial liabilities in a business combination

Fair value measurement and disclosure

 

 

[IFRS 13:7(c)] Measurement of the fair value less costs of disposal of cash-generating units for impairment testing

Fair value measurement and disclosure

Fair value measurement and disclosure

 

 

[IAS 16] Property, plant and equipment measured using the revaluation model
[IAS 40] Investment properties measured using the fair value model
[IAS 41] Biological assets measured at fair value
[IFRS 5] Assets held for disposal, measured at fair value less costs to sell

Fair value definitions Fair value measurement and disclosure

Fair value is defined differently between IFRS standards, here are the definitions:

  • IAS 32, IAS 36, IFRS 1, IFRS 9, IFRS 13 Definition:
    Fair value is 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.

Fair value measurement and disclosure

  • IFRS 16 Definition:
    For the purpose of applying the lessor accounting requirements in IFRS 16 Leases, the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction.
  • IFRS 2 Definition:
    The amount for which an asset could be exchanged, a liability settled, or an equity instrument granted could be exchanged, between knowledgeable, willing parties in an arm’s length transaction.
  • IFRS 13 Definition:
    Fair value less costs of disposal: Costs of disposal, other than those that have been recognised as liabilities, are deducted in measuring fair value less costs of disposal. Examples of such costs are legal costs, stamp duty and similar transaction taxes, costs of removing the asset, and direct incremental costs to bring an asset into condition for its sale. However, termination benefits (as defined in IAS 19) and costs associated with reducing or reorganising a business following the disposal of an asset are not direct incremental costs to dispose of the asset.

But the differences are not leading to different versions of fair value accounting. Fair value measurement and disclosure

Fair value accounting

Fair value accounting is the practice of accounting that values certain assets and liabilities at their current market value. Especially, for the measurement of financial instruments and the assets and liabilities assumed in a business combination, fair value is accepted to be the most appropriate valuation method.

During his speech in the Sixth Symposium on Accounting Research, Paris, France, on December 12, 2016, Hans Hoogervorst, the Chairman of IASB, expressed that the cost-based accounting is not a true reflection of long-term equity investments’ performance because especially for investors it would be insufficient to reflect the performance of the company and that it would not provide appropriate information to investors’ needs.

He also stated that the application of fair value accounting would not cause the financial statements to fluctuate, and at the same time, the recognition of gains or losses when the asset is disposed from its cost would have no relation with the prudence principle as those amounts have been accumulated since the previous years.

Fair value measurement and disclosure

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