Fair Value Accounting: ©2018 John Wiley & Sons Australia LTD
Fair Value Accounting: ©2018 John Wiley & Sons Australia LTD
• Shortcomings:
– Does not specify if the entity is buying or selling
– What does “settling” a liability mean?
• Does not refer to a ‘creditor’
– At what stage of the hypothetical transaction is
fair value measured
– What does willing mean?
• Could one party be desperate?
AASB 13/IFRS 13 Fair Value Measurement
• Objectives:
(a) to establish a single source of guidance for all
fair value measurements required or permitted
by IFRSs to reduce complexity and improve
consistency in their application;
(b) to clarify the definition of fair value and related
guidance in order to communicate the
measurement objective more clearly; and
AASB 13/IFRS 13 Fair Value Measurement
• Objectives:
(c) to enhance disclosures about fair value to
enable users of financial statements to assess
the extent to which fair value is used and to
inform them about the inputs used to derive
those fair values.
AASB 13/IFRS 13 Fair Value Measurement
• Scope:
– When another IFRS requires or permits fair value
measurements or disclosures about fair value
measurements.
• Excluded from the scope:
– Share-based payments.
– Leasing transactions.
– Measurements that may appear similar to fair
value but are not termed as such.
AASB 13/IFRS 13 Fair Value Measurement
• Market participants:
– The fair value of the asset or liability shall be
measured using the assumptions that market
participants would use in pricing the asset or
liability. In developing those assumptions, an
entity need not identify specific market
participants.
Fair values are specific, what factors should
be considered?