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IFRS 13
FAIR VALUE MEASUREMENT
What to Value? 2

 A stand alone asset or liability

(e.g. Financial Instrument)
 Group of assets
 Group of liabilities
 Group of assets and liabilities
(e.g. a business)
Why Fair Value? 3

to 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
What is Fair Value? 4

an exit price at the measurement date from the perspective

of a market participant that holds the asset or owes the
liability.

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.
 Considerations for Fair Valuation 5

• The condition and location of the

asset.

• Restrictions, if any, on the sale or

use of the asset.
 Market of Transfer 6

• Principal market
(Most priority irrespective of the value in advantageous
market)
• Most advantageous market
(In Absence of Principal market)
 THE PRICE 7
Fair value is the exit price that would be received in an
orderly transaction in the market at the measurement date
under current market conditions regardless of whether that
price is
• directly observable or
• estimated using another
valuation technique.
 THE PRICE 8
Fair value is the exit price that would be received in an orderly
transaction in the market at the measurement date under current
market conditions regardless of whether that price is
• directly observable or
• estimated using another valuation
technique.
The price used to measure the fair value of the asset or liability
shall not be adjusted for transaction costs.
 THE TRANSACTION 9

• OBSERVABLE TRANSACTIONS

• UNOBSERVABLE
TRANSACTIONS
LEVELS OF VALUATION 10
Level 1: Observable Data for Identical Instruments
e.g. Silver Toyota Premio 2015
Equity Share in Listed Company

Level 2: Observable Data for Similar Instruments

e.g. Red Toyota Premio 2015
Equity Share in Non-listed Company

Level 3: No Observable Data (Fair Valuation)

e.g. Customized Limited Edition Toyota Premio 2015
Research & Development Project Acquired
 APPROACHES OF VALUATION 11
Market Approach
prices and other relevant information generated by market transactions
involving identical or comparable (i.e similar) assets or liabilities

Cost Approach
the amount that would be required currently to replace the service capacity
of an asset (i.e. replacement cost)

Income Approach
Converted future amounts to a current amount.
Reflects current market expectations about future amounts.
 Non-Financial Asset 12

For non-financial assets the fair value measurement

looks at the use to which the asset can be put. It
takes into account the ability of a market participant
to generate economic benefits by using the asset in
its highest and best use.
 EXAMPLE 13
Market X (BDT) Market Y (BDT)

Price 58 57

Transaction Cost (4) (3)

Transportation Cost (4) (2)

50 52

IF Market X is Principal – fair value BDT 54.

IF neither is Principal Market –
Fair Value is most advantageous, i.e. Market Y –
BDT 55.
 DISCLOSURE 14
• The valuation techniques and inputs used to develop those
measurements
• For recurring fair value measurements using significant unobservable
inputs (Level 3), the effect of the measurements on profit or loss or
other comprehensive income for the period.

• Disclosure requirements will include:

1. reconciliation from opening to closing balances
2. quantitative information regarding the inputs used
3. valuation processes used by the entity
4. sensitivity to changes in inputs