IFRS

IFRS 13
13
Fair Value
Measuremet
Presented By:
2

IAS 13 – Objective

 Market-based measurement, not an entity-specific

measurement.
 FVM estimate the price at which an orderly transaction
to sell the asset or to transfer the liability would take
place between market participants at the measurement
date under current market conditions.
3

IAS 13 – Scope

Applies when another IFRS requires or permits:

Fair value measurements or share-based payment

transactions in accordance
with IFRS 2 Share-based
disclosures about fair value measurements Payment
(and
(and measurements,
measurements, such
such as
as fair
fair value
value less
less costs
costs to
to sell,
sell, based
based

on
Leasing transactions in
on fair
fair value
value or
or disclosures
disclosures about
about those
those measurements),
measurements),
accordance with IFRS 16
Leases
except
4

IAS 13 – Definition of Fair Value Management

It 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.

5

IAS 13 – FVM Approach

A fair value measurement requires an entity to determine all the following:


 The
The particular
particular asset
asset or
or liability
liability subject
subject of
of the
the measurement
measurement
(consistently
(consistently with
with its
its unit
unit of
of account)
account)

 For
For a
a non-financial
non-financial asset,
asset, the
the valuation
valuation basis
basis appropriate
appropriate for
for the
the measurement
measurement
(consistently
(consistently with
with its
its highest
highest and
and best
best use).
use).

 The
The principal
principal (or
(or most
most advantageous)
advantageous) market
market for
for the
the asset
asset or
or liability.
liability.

 The
The valuation
valuation technique(s)
technique(s) appropriate
appropriate for
for the
the measurement,
measurement, considering:
considering:

 The
The availability
availability of
of data
data that
that market
market participants
participants would
would use
use when
when pricing
pricing the
the asset
asset or
or liability
liability

 The
The level
level of
of the
the fair
fair value
value hierarchy
hierarchy within
within which
which the
the inputs
inputs are
are categorised.
categorised.
6

IAS 13 – Asset or Liability

when
when measuring
measuring fair
fair value
value an
an entity
entity shall
shall take
take into
into account
account the
the characteristics
characteristics of
of the
the asset
asset or
or

liability
liability ifif market
market participants
participants would
would take
take those
those characteristics
characteristics into
into account
account when
when pricing
pricing the
the

asset
asset or
or liability
liability at
at the
the measurement
measurement date.
date. Such
Such characteristics
characteristics include,
include, for
for example,
example, the
the

following:
following:

(a)
(a) the
the condition
condition and
and location
location of
of (b) restrictions, ifif any,
(b) restrictions, any, on
on the
the sale
sale or
or
the asset; .
the asset; . use
use of
of the
the asset
asset
7

IAS 13 – Asset or Liability

The
The asset
asset or
or liability
liability measured
measured at
at fair
fair value
value might
might be
be either
either of
of the
the following:
following:

(a)
(a) A
A stand-alone
stand-alone asset
asset or
or liability
liability (e.g.
(e.g. a
a financial
financial
instrument or a non-financial asset);
instrument or a non-financial asset); oror

(b)
(b) restrictions,
restrictions, ifif any,
any, on
on the
the sale
sale or
or
use of the asset
use of the asset
8

IAS 13 – The Transaction

A
A FVM
FVM assumes
assumes that
that asset
asset or
or liability
liability is
is exchanged
exchanged in
in an
an orderly
orderly

transactions
transactions between
between market
market participants
participants to
to ::


 sell
sell the
the asset
asset or
or


 transfer
transfer the
the liability
liability at
at the
the measurement
measurement date
date under
under current
current

market
market conditions.
conditions.
9

IAS 13 – The Transaction

A
A FVM
FVM assumes
assumes that
that the
the transaction
transaction to
to sell
sell the
the asset
asset or
or transfer
transfer the
the liability
liability takes
takes place
place
either:
either:

(a)
(a) In
In the
the principal
principal market
market for
for the
the asset
asset or
or liability;
liability;
or
or

(b)
(b) in
in the
the most
most advantageous
advantageous market
market for
for the
the
asset or liability.
asset or liability.
(in
(in the
the absence
absence of
of a
a principal
principal market)
market)
10

IAS 13 – Market Participants


 An
An entity
entity shall
shall measure
measure the
the fair
fair value
value of
of an
an asset
asset or
or a
a liability
liability using
using the
the

assumptions
assumptions that
that market
market participants
participants would
would use
use when
when pricing
pricing the
the asset
asset or
or

liability.
liability.


 An
An entity
entity assumes
assumes that
that market
market participants
participants act
act in
in their
their economic
economic best
best interest.
interest.
11

IAS 13 – Valuation Techniques


 IFRS
IFRS 13
13 describes
describes three
three valuation
valuation techniques
techniques to
to determiner
determiner FV.
FV.

1.
1. The
The market
market approach
approach ::
An
An entity
entity uses
uses prices
prices &
& other
other relevant
relevant information
information generated
generated by
by market
market transactions
transactions

involving
involving identical
identical or
or comparable
comparable assets,
assets, liabilities
liabilities or
or a
a group
group of
of assets
assets and
and liabilities.
liabilities.

2.
2. The
The income
income approach
approach ::
An
An entity
entity converts
converts future
future amounts
amounts (e.g.,
(e.g., cash
cash flows
flows or
or income
income and
and expenses)
expenses) to
to a
a single
single

current
current (i.e.,
(i.e., discounted)
discounted) amount.
amount.

3.
3. The
The cost
cost approach
approach
12

IAS 13 – Premiums and Discounts


 IFRS
IFRS 13
13 permits
permits a
a premium
premium or
or discount
discount to
to be
be included
included in
in a
a fair
fair value
value

measurement
measurement only
only when
when itit is
is consistent
consistent with
with the
the unit
unit of
of account
account for
for the
the

item.
item.
13

IAS 13 – Disclosures


 The
The IFRS
IFRS requires
requires a
a number
number of
of quantitative
quantitative and
and qualitative
qualitative disclosures
disclosures about
about FVM.
FVM.


 Many
Many of
of these
these are
are related
related to
to the
the following
following three-level
three-level fair
fair value
value hierarchy
hierarchy on
on the
the basis
basis of
of

the
the inputs
inputs to
to the
the valuation
valuation technique
technique

Level 1 Level 2
Inputs are fully observable (e.g. unadjusted Inputs are those other than quoted prices within
quoted prices in an active market for identical Level 1 that are directly or indirectly observable.
assets and liabilities that the entity can access at
the measurement date) Level
Level 3
3
Inputs
Inputs are
are unobservable
unobservable
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IAS 13 – Fair Value Measurement

End of IFRS 13