Fair Value Measurement – It’s time for a review!

For those companies that record assets and liabilities in their financial statements at fair value, the requirements of the fair value measurement standard, IFRS 13 (AASB 13) will be very familiar. IFRS 13 defines fair value, including how it should be measured and which disclosures are required to be made about the fair value measurements.

Having now been in force for a number of years, the International Accounting Standards Board (IASB) recently issued a Request for Information (RFI) from stakeholders. This RFI aims to provide the IASB with feedback on stakeholder experiences with IFRS 13 Fair Value Measurement. This request, which is part of the IASB’s normal post implementation review process, aims to check:

  • Whether the standard meets its objectives.
  • How the requirements of IFRS 13 affect investors, auditors and companies.
  • Whether there are areas of the standard that are difficult to implement and may result in the inconsistent application of the standard.
  • Whether there have been unexpected costs arising in connection with the enforcement or application of the standard.

The IASB’s review will consider:

  • Additional information about the measurement of quoted investments in subsidiaries, joint ventures and associates, at fair value.
  • The application of the “highest and best use” concept, when determining the fair value of non-financial assets – particularly in the measurement of groups of operating assets
  • The fair value measurement disclosures – particularly in relation to some Level 3 fair value measurement disclosures which are viewed as being onerous and at the same time, their usefulness is questioned.
  • The application of judgement in specific areas.

In addition to the above considerations, the IASB is hopeful that the review will also identify whether financial statement preparers need to be provided with further guidance on the measurement of the fair value of biological assets and unquoted equity investments.

At the conclusion of the review, the IASB will consider comments received from the RFI along with information gathered through other consultation processes and the results of research gathered on the issue. This will then be used as a basis for determining if and when any changes to IFRS 13 will be made.

Although the timing for completion of this process is not known at this stage, the outcome will hopefully provide some clarity for financial statement preparers surrounding some of the more problematic aspects of the standard.

For more information about this standard, and how it may affect your business, speak to your Crowe Horwath adviser.

By Cyrus Patel
Partner – Audit & Assurance