IFRS 13 Fair Value Measurement
A fair value measurement is for a particular asset or liability. To determine fair value, an entity must consider the qualities of the asset or liability. These qualities are the ones that market participants would consider when pricing it at the measurement date.
History
In May 2011 the International Accounting Standards Board issued IFRS 13 Fair Value Measurement. IFRS 13 defines fair value and replaces the requirement contained in individual Standards. Other Standards have made minor consequential amendments to IFRS 13.
They include IAS 19 Employee Benefits (issued June 2011), Annual Improvements to IFRSs 2011–2013 Cycle (issued December 2013), IFRS 9 Financial Instruments (issued July 2014) and IFRS 16 Leases (issued January 2016). Source: IFRS.org
Frequently asked questions
What is fair value measurement as per IFRS 13?
IFRS 13 defines fair value as the price received to sell an asset or paid to transfer a liability. This definition applies to market participants at the measurement date.
How do you measure fair value?
To find out how much something is worth, you can look at the prices of similar things that have been sold. They can also estimate the potential earnings and calculate the cost of purchasing a new one.
What is an example of a fair value?
The fair value of an item relies solely on its intrinsic worth, whereas the market value relies on supply and demand. If the fair value of a tablet is R5000, but market supply is high, the cost of the tablet may fall to a lower price.
What are the valuation techniques for IFRS 13?
The three predominant valuation techniques outlined by IFRS 13 are:
- The market approach.
- The cost approach.
- The income approach.
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