Leveraged buyout IFRS 3 best reporting

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Leveraged buyout IFRS 3 best reporting – In corporate finance, a leveraged buyout (LBO) is a transaction where a company is acquired using debt as the main source of consideration. These transactions typically occur when a private equity (PE) firm borrows as much as they can from a variety of lenders (up to 70 or 80 percent of the purchase price) and funds the balance with their own equity. Leveraged buyout IFRS 3 best reporting

1 The process and business reason

The use of leverage (debt) enhances expected returns to the private equity firm. By putting in as little of their own money as possible, PE firms can achieve a large return on equity (ROE) and internal … Read more

Fair value

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

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.

IFRS 16 Definition Fair value: 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 Fair value:

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.

The key term … Read more

11 Best fair value measurements under IFRS 13

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11 Best fair value measurements under IFRS 13 – Several IFRS standards provide guidance regarding the scope and application of the fair value option for assets and liabilities. Here they are from 1 to 11…….

1 Investments in associates and joint ventures

Investments held by venture capital organizations and the like are exempt from IAS 28’s requirements only when they are measured at fair value through profit or loss in accordance with IFRS 9. Changes in the fair value of such investments are recognized in profit or loss in the period of change.

The IASB acknowledged that fair value information is often readily available in venture capital organizations and entities in similar industries, even for start-up and … Read more

IFRS 7 Complete Maturity analysis disclosure

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IFRS 7 Complete Maturity analysis disclosure – IFRS 7 requires certain disclosures to be presented by category of an instrument based on the IFRS 9 recognition and measurement categories of financial instruments.

Certain other disclosures are required by class of financial instrument. For those disclosures an entity must group its financial instruments into classes of similar instruments as appropriate to the nature of the information presented. [IFRS 7 6]

The two main categories of disclosures required by IFRS 7 are:

  1. information about the significance of financial instruments [IFRS 7 7 – 30]
  2. information about the nature and extent of risks arising from financial instruments [IFRS 7 31 – 42]

So … Read more

Fair value measurement

Fair Value Measurement can present significant challenges for preparers of financial statements, particularly because it involves using judgment and estimation. Further, it is the market participant view that shapes fair value, so preparers need to monitor whether the valuation models and assumptions they use for financial reporting appropriately reflect those of market participants.

Fair Value Measurement under IFRS 13:Fair value measurement

  1. defines fair value;
  2. sets out in a single IFRS a framework for measuring fair value; and
  3. requires disclosures about fair value measurements.

The definition of fair value focuses on assets and liabilities because they are a primary subject of accounting measurement. In addition, IFRS 13 is applied to an entity’s own equity instruments measured at fair value.

The … Read more

The 15 most important IFRS 13 Topics

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The 15 most important IFRS 13 Topics – The fair value measurement standard applies to most fair value measurements and disclosures (including measurements based on fair value) that are required or permitted by other standards. The 15 most important IFRS 13 Topics

Overview

  • ‘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.
  • What is being measured – e.g. a stand-alone asset or a group of assets and/or liabilities – generally depends on the unit of account, which is established under the relevant standard.
  • Fair value is based on assumptions that market participants would use in pricing
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Diagnosed for importance decommissioning liability IFRS

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Diagnosed for importance decommissioning liability IFRS – IAS 36 – Impact of a decommissioning liability in determining the recoverable amount of a Cash generating unit.

At a glance

Most liabilities are ignored when calculating recoverable amounts in impairment testing. However certain liabilities, such as decommissioning and restoration liabilities, cannot be separated from the related assets. This presents challenges when applying both the ‘fair value less costs of disposal’ approach and the ‘value in use’ approach. The IFRS Interpretations Diagnosed for importance decommissioning liability IFRSCommittee (IC) considered how to apply the current guidance to a value in use calculation. The IC declined to take the issue on to the agenda as the guidance on value in use is clear, therefore neither an … Read more

IFRS 13 Fair value non-performance risks

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IFRS 13 Fair value non-performance risks – One of the key challenges for many reporting entities in estimating fair value in accordance with the fair value standards has been determining and incorporating the impact of non-performance risk, including credit risk, into the fair value measurement. Non-performance risk is the risk that an entity will not perform on its obligation. This risk should be incorporated into a fair value measurement using a market-based estimate that follows the framework of the fair value standards and should be measured from the perspective of a market participant. The concept of non-performance risk incorporates credit risk and other risk factors, including regulatory, operational, and commercial risks.

Credit risk is often the largest … Read more

Fair value of decommissioning obligation

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Fair value of decommissioning obligation is about a nice example of decommissioning a large oil platform.

In the oil and gas industry, it is important to plan ahead and consider how decommissioning large-scale assets such as rigs will be carried out in years to come. Specifically, you need to work out how to account for the current value of what you’ll be spending in the future. With depleting oil prices since 2014 from their glory days of $100 plus and the resulting volatility and uncertainty that has brought to the industry, being able to meet and estimate that obligation has never been more critical.

In this post, the obligations under the International Financial Reporting Standards (IFRS) will … Read more