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ACCA Strategic Professional · Strategic Business Reporting (International) · Non-current assets

Tessen Co, a listed entity, discloses the fair value of a revalued building in its financial statements. A director proposes to omit the fair value hierarchy disclosure because the valuation relies on unobservable inputs and shareholders might question the estimate. What is the appropriate response under IFRS 13 and professional ethics?

The accountant should refuse the request. IFRS 13 requires the hierarchy level, valuation techniques and significant unobservable inputs to be disclosed for Level 3 fair values, including revalued buildings, and omitting them to avoid shareholder questions would be misleading and unethical.

  1. AAgree, because disclosure of Level 3 inputs is optional for non-current assets
  2. BAgree, provided the valuation was prepared by an external valuer
  3. CRefuse, because recurring Level 3 fair value measurements require disclosure of the hierarchy level and valuation techniques and significant inputs, and omitting them would be misleadingCorrect
  4. DDisclose only the fair value total, as hierarchy disclosure applies only to financial instruments

Explanation

IFRS 13 requires disclosure of the hierarchy level for recurring and non-recurring fair value measurements, plus valuation techniques and quantitative information on significant unobservable inputs for Level 3. Omitting them to avoid scrutiny would breach integrity and objectivity principles. The requirements apply to non-financial assets as well, and use of an external valuer does not remove them.

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