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 IFRS 13 Fair Value Measurement

 IFRS 13 Fair Value Measurement : This Basis for Conclusions summarises the considerations of the International Accounting Standards Board (IASB) in reaching the conclusions in IFRS 13 Fair Value Measurement. It includes the reasons for accepting particular views and rejecting others. Individual IASB members gave greater weight to some factors than to others.

 IFRS 13 Fair Value Measurement

 IFRS 13 Fair Value Measurement : IFRS 13 is the result of the IASB’s discussions about measuring fair value and disclosing information about fair value measurements in accordance with International Financial Reporting Standards (IFRSs), including those held with the US national standard-setter, the Financial Accounting Standards Board (FASB), in their joint project on fair value measurement.

Some IFRSs require or permit entities to measure or disclose the fair value of assets, liabilities or their own equity instruments. Because those IFRSs were developed over many years, the requirements for measuring fair value and for disclosing information about fair value measurements were dispersed and in many cases did not articulate a clear measurement or disclosure objective.

 IFRS 13 Fair Value Measurement

 IFRS 13 Fair Value Measurement : As a result, some of those IFRSs contained limited guidance about how to measure fair value, whereas others contained extensive guidance and that guidance was not always consistent across those IFRSs that refer to fair value. Inconsistencies in the requirements for measuring fair value and for disclosing information about fair value measurements have contributed to diversity in practice and have reduced the comparability of information reported in financial statements.

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To remedy that situation, the IASB added a project to its agenda with the following objectives:
(a) to establish a single set of requirements for all fair value measurements required or permitted by IFRSs to reduce complexity and improve consistency in their application, thereby enhancing the comparability of information reported in financial statements;
(b) to clarify the definition of fair value and related guidance to communicate the measurement objective more clearly;

(c) to enhance disclosures about fair value measurements that will help users of financial statements assess the valuation techniques and inputs used to develop fair value measurements; and
(d) to increase the convergence of IFRSs and US generally accepted accounting principles (GAAP).

 IFRS 13 Fair Value Measurement

 IFRS 13 Fair Value Measurement : IFRS 13 is the result of that project. IFRS 13 is a single source of fair value measurement guidance that clarifies the definition of fair value, provides a clear framework for measuring fair value and enhances the disclosures about fair value measurements. It is also the result of the efforts of the IASB and the FASB to ensure that fair value has the same meaning in IFRSs and in US GAAP and that their respective fair value measurement and disclosure requirements are the same (except for minor differences in wording and style;

IFRS 13 applies to IFRSs that require or permit fair value measurements or disclosures. It does not introduce new fair value measurements, nor does it eliminate practicability exceptions to fair value measurements (eg the exception in IAS 41 Agriculture when an entity is unable to measure reliably the fair value of a biological asset on initial recognition). In other words, IFRS 13 specifies how an entity should measure fair value and disclose information about fair value measurements. It does not specify when an entity should measure an asset, a liability or its own equity instrument at fair value.

The IASB and the FASB began developing their fair value measurement standards
separately.
The FASB began working on its fair value measurement project in June 2003. In September 2005, during the FASB’s redeliberations on the project, the IASB added to its agenda a project to clarify the meaning of fair value and to provide guidance for its application in IFRSs.
In September 2006 the FASB issued SFAS 157 (now in Topic 820). Topic 820 defines fair value, establishes a framework for measuring fair value and requires disclosures about fair value measurements.
In November 2006 as a first step in developing a fair value measurement standard, the IASB published a discussion paper Fair Value Measurements. In that discussion paper, the IASB used SFAS 157 as a basis for its preliminary views because of the consistency of SFAS 157 with the existing fair value measurement
guidance in IFRSs and the need for increased convergence of IFRSs and US GAAP. The IASB received 136 comment letters in response to that discussion paper. In November 2007 the IASB began its deliberations for the development of the exposure draft Fair Value Measurement.
In May 2009 the IASB published that exposure draft, which proposed a definition of fair value, a framework for measuring fair value and disclosures about fair value measurements. Because the proposals in the exposure draft were developed using the requirements of SFAS 157, there were many similarities between them. However, some of those proposals were different from the requirements of SFAS 157 and many of them used wording that was similar, but not identical, to the wording in SFAS 157. The IASB received 160 comment letters in response to the proposals in the exposure draft. One of the most prevalent comments received was a request for the IASB and the FASB to work together to develop common fair value measurement and disclosure requirements in IFRSs and US GAAP.

 IFRS 13 Fair Value Measurement

 IFRS 13 Fair Value Measurement : In response to that request, the IASB and the FASB agreed at their joint meeting in October 2009 to work together to develop common requirements. The boards
concluded that having common requirements for fair value measurement anddisclosure would improve the comparability of financial statements prepared in accordance with IFRSs and US GAAP. In addition, they concluded that having common requirements would reduce diversity in the application of fair value
measurement requirements and would simplify financial reporting. To achieve those goals, the boards needed to ensure that fair value had the same meaning in IFRSs and US GAAP and that IFRSs and US GAAP had the same fair value measurement and disclosure requirements (except for minor differences in
wording and style). Consequently, the FASB agreed to consider the comments received on the IASB’s exposure draft and to propose amendments to US GAAP if necessary.

The boards began their joint discussions in January 2010. They discussed nearly all the issues together so that each board would benefit from hearing the rationale for the other board’s decisions on each issue. They initially focused on the following:
(a) differences between the requirements in Topic 820 and the proposals in the IASB’s exposure draft;
(b) comments received on the IASB’s exposure draft (including comments received from participants at the IASB’s round-table meetings held in November and December 2009); and
(c) feedback received on the implementation of Topic 820 (eg issues discussed by the FASB’s Valuation Resource Group).

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 IFRS 13 Fair Value Measurement

 IFRS 13 Fair Value Measurement : In March 2010 the boards completed their initial discussions. As a result of those discussions, in June 2010 the FASB issued a proposed Accounting Standards Update (ASU) Fair Value Measurements and Disclosures (Topic 820): Amendments for Common Fair Value Measurement and Disclosure Requirements in U.S GAAP and IFRSs and the IASB re-exposed a proposed disclosure of the
unobservable inputs used in a fair value measurement (Measurement Uncertainty Analysis Disclosure for Fair Value Measurements). The IASB concluded that it was necessary to re-expose that proposal because in their discussions the boards agreed to require a measurement uncertainty analysis disclosure that included
the effect of any interrelationships between unobservable inputs (a requirement that was not proposed in the May 2009 exposure draft and was not already required by IFRSs). The IASB received 92 comment letters on the re-exposure document.

 IFRS 13 Fair Value Measurement

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