Skip to content

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

Mara Group is measuring the fair value of an unquoted business unit as part of a group acquisition. A director proposes adding a premium to the valuation because Mara expects to realise synergies available only to Mara through combining the unit with its own operations. Which statement is correct under IFRS 13?

The premium should be excluded. IFRS 13 fair value is a market-based measure using assumptions that market participants would use, so synergies specific to Mara and unavailable to other participants are not reflected, regardless of board approval or management's expectations.

  1. AInclude the premium, because fair value reflects the entity's specific expected cash flows
  2. BInclude the premium only if the synergies are approved by the board
  3. CExclude the premium, because market participant assumptions exclude entity-specific synergies not available to other participantsCorrect
  4. DInclude half of the premium to reflect uncertainty of the synergies

Explanation

IFRS 13 fair value uses assumptions market participants would use, and these exclude synergies specific to the reporting entity that other participants could not obtain. Including the premium would produce an entity-specific value, which is a different measure. Board approval does not change the market participant perspective.

Did you get it right without looking?

One question tells you little. A timed set on Fair value measurement shows your real accuracy, how long you take and where you lose marks.

Practise Fair value measurementFree diagnostic mock

More Fair value measurement questions