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ACCA Strategic Professional · Strategic Business Reporting (International) · Fair value measurement

Delta Co changes its valuation technique for an investment property from a market comparison approach to a discounted cash flow approach because comparable transactions have become scarce. Under IFRS 13, how should this change be treated?

The change is accounted for as a change in accounting estimate under IAS 8, applied prospectively, with disclosure of the change in technique and the reasons. IFRS 13 permits it where the new technique gives an equally or more representative fair value.

  1. AAs a change in accounting policy applied retrospectively under IAS 8
  2. BAs a prior period error requiring restatement
  3. CAs a change in accounting estimate, with disclosure of the change and the reasons for itCorrect
  4. DIt is prohibited; the technique must be applied consistently each year

Explanation

IFRS 13 states that a change in valuation technique or its application is appropriate if it results in an equally or more representative measure, and it is accounted for as a change in accounting estimate under IAS 8. Disclosure of the change and reasons is required. Retrospective policy-change treatment does not apply.

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