- 8 Marks
CR – May 2017 – L3 – Q6 – Fair Value Measurement (IFRS 13)
Identify the fair value hierarchies under IFRS 13 and distinguish between principal and most advantageous markets.
Question
The International Accounting Standards Board (IASB) aims at enhancing the guidance available for assessing fair value in order to increase consistency and comparability in fair value measurements and related disclosures. To this end, fair value measurements are categorized into a three-level hierarchy, based on the type of inputs to the valuation techniques used in IFRS 13. IFRS uses the terms principal or most advantageous market.
Required:
(i) What are the fair value hierarchies under IFRS 13? (3 Marks)
(ii) Distinguish between the principal and most advantageous market and state how price is determined in the principal market taking into consideration transport and transaction costs. (5 Marks)
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