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23 Cards in this Set
- Front
- Back
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Which AASB Standard refers to Fair Value Measurement |
AASB 13 |
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What are the main objectives of AASB 13 (3) |
Define FV establish a framework for measuring Fv Require disclosures about FV measurement |
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Define Fair Value as per AASB 13 (5) |
the price that would be received to sell an asset / paid to transfer a liability (exit price) in an orderly transaction between market participants at the measurement date |
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What is exit price based on? |
perspective of the entity that holds the asset or owes the liability expectations about future cash flows that will be generated by the asset / liability subsequent to sale / transfer |
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What is an orderly transaction (2) |
a transaction that assumes expsoure to the market for a period before the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets or liabilities |
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What are the criteria for "market participants" (4) |
independent from each other knowledgeable about the asset / liability ability to enter into the transaction not forced / compelled |
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What are transaction costs? |
incremental direct costs that would not have been incurred had the decision to sell the asset / transfer the liability not been made |
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What are transport costs? |
Costs incurred to transport an asset from its current location to its principal market |
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What is the four step process in making a FV measurement |
Determine the asset / liability that is to be measured Determine the valuation premise that is appropriate Determine the principal / most advantageous market Determine the appropriate valuation technique |
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Step 1: What in involved in determining the Asset / Liability that is the subject of the measurement |
considering characteristics that market participants would take into account when pricing an asset / liability e.g. location, condition, restrictions on sale/use, stand-alone/group? |
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Step 2: How does one determine the valuation premise that is appropriate |
FV measured by considering the highest and best use of an asset from the perspective of the market participant, not holder |
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Step 3: What is the principal market and the most advantageous market ? |
Principal: market with the greatest volume and level of activity Most advantageous: market that would maximise the amount received/paid after deducting transaction and transport costs |
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What valuation techniques exist (3) |
market approach cost approach income approach |
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Market approach |
prices and other relevant info generation by market transactions involving identical or comparable assets or liabilities or a group of assets or liabilities info source - active markets |
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Cost approach |
Amount that would be required currently to replace the service capacity of an asset (replacement cost). info source - acquire or construction costs with adjustments |
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Income approach |
converts future amounts (cash flows or income and expenses) to a single current (discounted) amount info source - current market expectations for future cash flows, or income and expenses for the asset |
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Step 4: What are observable inputs? |
developed using market data such as publicly available info |
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Step 4: What are unobservable inputs? |
Those here market data is unavailable and developed using best info available |
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What are level 1 inputs? |
quoted prices in active markets for identical assets or liabilities that the entity can access at the measurement date |
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What are level 2 inputs? |
quoted prices for similar assets in active markets quoted prices for identical items in inactive markets |
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What are level 3 inputs? |
Unobservable inputs for the asset or liability Used when valuing cash generating units, trademarks, account receivable |
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What are intangible assets? |
no physical substance non-monetary identifiable |
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what is amortisation? |
allocation of depreciable amount of intangibles to periods benefiting from their use |
