What are the main objectives of IFRS 13?
The objective of IFRS 13 is to set out a single definition of fair value and to require entities to provide disclosures regarding fair value in their financial statements for all assets and liabilities (financial and non-financial) measured at fair value [IFRS 13 paragraph 1].
What 3 valuation approaches does IFRS 13 identify?
The three widely used valuation techniques cited by IFRS 13 are: market approach, cost approach, and. income approach.
What is the definition of the principal market used in IFRS 13?
IFRS 13 assumes the transaction to sell the asset or transfer the liability takes place in the principal market or, in the absence of a principal market, in the most advantageous market. The principal market is the market with the greatest volume and level of activity for the asset or liability.
How the application of IFRS 13 enhances the usefulness of financial information?
With the introduction of IFRS 13 came increased disclosure requirement as it is believed that this will enhance transparency and aid investing decisions. This is because the financial statement will comprise all such information on measurement of assets and liabilities deemed necessary to help investors make decisions.
What is book value in balance sheet?
Book value is the net value of a firm’s assets found on its balance sheet, and it is roughly equal to the total amount all shareholders would get if they liquidated the company. Book value per share is a way to measure the net asset value investors get when they buy a share.
What are Level 1 inputs?
A Level 1 input is a quoted price for an identical item in an active market on the measurement date. This is the most reliable evidence of fair value, and should be used whenever this information is available.
How does IFRS 13 measure fair value?
IFRS 13 defines fair value as 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 (an exit price).
What are Level 3 assets?
Level 3 assets are financial assets and liabilities that are considered to be the most illiquid and hardest to value. Examples of Level 3 assets include mortgage-backed securities (MBS), private equity shares, complex derivatives, foreign stocks, and distressed debt.
What is orderly transaction?
An orderly transaction is one that assumes exposure to the market for a period before the date of measurement to allow for normal marketing activities to take place and to ensure that it is not a forced transaction.
What are fair value adjustments?
A debit or a credit to the account of securities fair value adjustment is an accumulation or deficit, respectively, to the fair value of the trading security. Changes in the fair value of a held-for-trading security from one period to another become an unrealized gain or loss to earnings.