About

IFRS 13 defines fair value, sets out a framework for measuring fair value, and requires disclosures about fair value measurements.

It applies when another Standard requires or permits fair value measurements or disclosures about fair value measurements (and measurements based on fair value, such as fair value less costs to sell), except in specified circumstances in which other Standards govern. For example, IFRS 13 does not specify the measurement and disclosure requirements for share-based payment transactions, leases or impairment of assets. Nor does it establish disclosure requirements for fair values related to employee benefits and retirement plans.

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). When measuring fair value, an entity uses the assumptions that market participants would use when pricing the asset or the liability under current market conditions, including assumptions about risk. As a result, an entity’s intention to hold an asset or to settle or otherwise fulfil a liability is not relevant when measuring fair value.

What you should know

  • Know and apply the definition of fair value.
  • Understand the concepts of an orderly transaction, market participants and the principal or most advantageous market.
  • Apply the appropriate valuation approach when measuring fair value.
  • Distinguish between Level 1, Level 2 and Level 3 inputs in the fair value hierarchy.
  • Measure fair value for assets, liabilities and equity instruments where required or permitted by IFRS Standards.
  • Present and disclose fair value measurements in the financial statements.
  • Explain the need for an accounting standard on fair value measurement
  • Understand the key characteristics of the term ‘fair value’
  • Understand the key concepts used in the fair value framework
  • Explain the steps in determining the fair value of non‐financial assets
  • Understand how to measure the fair value of liabilities
  • Explain how to measure the fair value of an entity’s own equity instruments
  • Discuss issues relating to the measurement of the fair value of financial instruments
  • Understand the impact of climate‐related matters on fair value
  • Prepare the disclosures required by IFRS 13 Fair Value Measurement.