Strategic Business Reporting (International) · Fair value measurement

IFRS 13 Scope and Fair Value Definition for ACCA SBR

Updated 11 October 2026 · Fact-checked

IFRS 13 defines fair value as 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. It is an exit, market-based price. It applies when another IFRS requires or permits fair value, with specific exclusions.

Understand IFRS 13 Scope and Fair Value Definition

IFRS 13 Fair Value Measurement does not tell you when to use fair value. Other standards do that, for example IAS 40, IFRS 9 and IFRS 3. IFRS 13 tells you how to measure it and what to disclose once another standard asks for it.

The core definition is an exit price. Fair value is the price you would receive to sell an asset, or pay to transfer a liability, in an orderly transaction between market participants at the measurement date. Think of it from the seller's side, not the buyer's. What you paid is an entry price. It may equal fair value at initial recognition, but it does not have to.

Fair value is market-based, not entity-specific. You use the assumptions that market participants would use, assuming they act in their own best economic interest. Your own plans, intentions or synergies that others could not obtain do not change fair value. This is the key difference from value in use under IAS 36, which is entity-specific and based on your own expected cash flows.

The scope covers fair value measurements, and measurements based on fair value such as fair value less costs of disposal, and disclosures about them. The standard does not apply to IFRS 2 share-based payment transactions, to IFRS 16 leases, or to measures that resemble fair value but are not, such as net realisable value in IAS 2 and value in use in IAS 36. Some disclosure exemptions also apply, for example plan assets measured at fair value under IAS 19.

In the exam, expect a scenario where a company uses a figure and you must say whether it is a fair value under IFRS 13. Then explain why. Use the definition words directly: exit, orderly, market participants, measurement date.

Key rules to remember

Fair value definition: Fair value = price received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; This is an exit price. It is not what the entity paid, and it is not the entity's own value.
Fair value less costs of disposal: FVLCD = fair value − incremental costs directly attributable to disposal; Fair value itself is measured before transaction costs. Costs are deducted only where a standard such as IAS 36 or IFRS 5 asks for them.
Scope rule: IFRS 13 applies when another IFRS requires or permits fair value measurement or disclosure; Main exclusions: IFRS 2 share-based payments, IFRS 16 leases, and measures similar to but not fair value (NRV in IAS 2, value in use in IAS 36).
Transaction costs: Fair value excludes transaction costs; Transaction costs are not a feature of the asset or liability. They do not form part of the fair value price.

How to solve IFRS 13 Scope and Fair Value Definition questions

Use this method for any scope or definition question on IFRS 13.

1Identify the measurement in the scenario and which standard requires or permits it, for example IAS 40, IFRS 9 or IFRS 3.
2Check the scope exclusions. Is it IFRS 2, IFRS 16, or a similar measure such as NRV or value in use?
3If IFRS 13 applies, state the definition: exit price, orderly transaction, market participants, measurement date.
4Test the figure in the scenario. Is it an entry price, an entity-specific value, or a forced or distressed sale price?
5Check whether transaction costs have wrongly been included in or deducted from fair value.
6Conclude clearly and give the figure or treatment, with a one-line reason tied to the scenario.
7Add the professional skills point where asked, such as advising the board on the effect on profit or on disclosure.

Quickest way: Three-question scope check

When to use it: Use this when a short written requirement asks whether a figure is a fair value or whether IFRS 13 applies.

Question 1: Does another IFRS ask for fair value? If not, IFRS 13 is not triggered.
Question 2: Is it excluded (IFRS 2, IFRS 16 leases) or only similar (NRV, value in use)?
Question 3: Is the figure an exit price to a market participant at the date? If it is entry or entity-specific, adjust it.
Write one sentence per question. Then give the conclusion.

Common mistakes in IFRS 13 Scope and Fair Value Definition

Treating fair value as the price the entity paid.
At initial recognition the transaction price often equals fair value, so students assume they are always the same.
Fix: Say fair value is an exit price at the measurement date. Transaction price is only a starting point and may differ, for example in a related party deal or a forced sale.
Using the entity's own intentions or expected synergies in fair value.
Students mix up fair value with value in use.
Fix: Use market participant assumptions. Value in use is entity-specific. Fair value is not.
Deducting transaction costs from fair value.
Students recall costs to sell from IFRS 5 and IAS 36 and apply them everywhere.
Fix: Fair value excludes transaction costs. Deduct them only when the standard asks for fair value less costs of disposal or costs to sell.
Saying IFRS 13 applies to share-based payments or leases.
IFRS 2 and IFRS 16 both use the words fair value.
Fix: IFRS 13 excludes IFRS 2 and IFRS 16 leases. Their own standards set the measurement rules. Name the exclusion.
Saying IFRS 13 tells you when to use fair value.
The title suggests it is a general fair value standard.
Fix: Say IFRS 13 is a measurement and disclosure standard only. The choice to use fair value comes from other standards.
Accepting a distressed sale price as fair value.
Students take an observable price at face value.
Fix: Fair value assumes an orderly transaction. A forced or liquidation sale price is not fair value unless it reflects market conditions and is orderly.

Worked examples

Example 1

Zeta Co holds an investment property under the IAS 40 fair value model. It bought the property for $8 million, including $0.2 million of legal costs. A broker says a market participant would pay $8.5 million at the year end, and Zeta would incur $0.3 million of agent fees if it sold. The finance director says the fair value is $8.2 million. Explain the correct fair value under IFRS 13 and why the director is wrong.

Show the solution

IAS 40 permits fair value, so IFRS 13 applies and defines how to measure it.
Fair value is the exit price a market participant would pay at the measurement date, which is $8.5 million.
The $8.2 million is a net of fees figure, so the director has deducted $0.3 million of transaction costs. IFRS 13 excludes transaction costs from fair value.
The $8 million cost and $0.2 million legal costs are entry data. They are not an exit price at the year end.

Answer: Fair value is $8.5 million. The director's figure wrongly deducts transaction costs and mixes in entry data. The $0.3 million agent fees are not deducted.

Example 2

Sigma Co has these measurements: (a) equity-settled share options granted to staff; (b) a property leased to Sigma under a 5-year lease; (c) inventory with a net realisable value of $2 million; (d) quoted shares held at fair value through profit or loss. State for each whether IFRS 13 applies.

Show the solution

(a) Share options are in IFRS 2. IFRS 13 excludes IFRS 2 transactions, so it does not apply.
(b) Lease accounting under IFRS 16 is excluded from IFRS 13, so it does not apply to measuring the lease.
(c) NRV in IAS 2 is similar to fair value but is not fair value. It is entity-specific, so IFRS 13 does not apply.
(d) IFRS 9 requires fair value through profit or loss. IFRS 13 applies, and the quoted price gives the fair value.

Answer: IFRS 13 does not apply to (a), (b) or (c). It applies to (d), where the quoted market price gives the exit price.

Exam tips

Quote the definition in your answer. Use the words exit price, orderly transaction, market participants and measurement date. Markers look for them.
In a scenario, find the figure that is wrong: entry price, entity-specific value, or one net of costs. Then say why.
When asked to contrast fair value and value in use, give three points: market-based versus entity-specific, exit price versus own cash flows, and what each is used for.
Link to the business. Say how a fair value change affects profit or OCI and what the board should disclose. This earns professional skills marks.
Do not spend time on detailed valuation techniques unless asked. For scope questions, keep to the definition and exclusions.

Practice questions from Fair value measurement

IFRS 13 Scope and Fair Value Definition in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

IFRS 13 Scope and Fair Value Definition: frequently asked questions

What is the IFRS 13 definition of fair value?

Fair value is 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. It is an exit price. It is market-based and not specific to the entity.

What is the difference between fair value and value in use?

Fair value is a market-based exit price using market participant assumptions. Value in use is the present value of cash flows the entity itself expects from continuing to use the asset, so it is entity-specific. IAS 36 uses both in the recoverable amount test.

Which items are outside the scope of IFRS 13?

IFRS 13 excludes share-based payment transactions under IFRS 2 and leases under IFRS 16. It also does not cover measures similar to fair value, such as net realisable value in IAS 2 and value in use in IAS 36.

Does fair value include transaction costs?

No. Fair value is not adjusted for transaction costs. If a standard needs fair value less costs of disposal, you deduct the costs separately.