IFRS 13

Presented By:
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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.
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IAS 13 – Scope

Applies when another IFRS requires or permits:

share-based payment
Fair value measurements or transactions in accordance
with IFRS 2 Share-based
disclosures about fair value measurements Payment

(and measurements, such as fair value less costs to sell, based

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

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IAS 13 – FVM Approach

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

 The particular asset or liability subject of the measurement
(consistently with its unit of account)
 For a non-financial asset, the valuation basis appropriate for the measurement
(consistently with its highest and best use).
 The principal (or most advantageous) market for the asset or liability.
 The valuation technique(s) appropriate for the measurement, considering:
 The availability of data that market participants would use when pricing the asset or liability
 The level of the fair value hierarchy within which the inputs are categorised.
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IAS 13 – Asset or Liability

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

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

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

following:

(a) the condition and location of (b) restrictions, if any, on the sale or
the asset; . use of the asset
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IAS 13 – Asset or Liability

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

(a) A stand-alone asset or liability (e.g. a financial

instrument or a non-financial asset); or

(b) restrictions, if any, on the sale or

use of the asset
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IAS 13 – The Transaction

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

transactions between market participants to :

 sell the asset or

 transfer the liability at the measurement date under current

market conditions.
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IAS 13 – The Transaction

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

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

or

(b) in the most advantageous market for the

asset or liability.
(in the absence of a principal market)
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IAS 13 – Market Participants

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

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

 An entity assumes that market participants act in their economic best interest.
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IAS 13 – Valuation Techniques

 IFRS 13 describes three valuation techniques to determiner FV.

1. The market approach :

An entity uses prices & other relevant information generated by market transactions

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

2. The income approach :

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

current (i.e., discounted) amount.

3. The cost approach

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IAS 13 – Premiums and Discounts

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

measurement only when it is consistent with the unit of account for the item.
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IAS 13 – Disclosures

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

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

the inputs to the valuation 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 3
Inputs are unobservable
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IAS 13 – Fair Value Measurement