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

Under IFRS 13 Fair Value Measurement, which of the following is a Level 2 input in the fair value hierarchy?

A quoted price for a similar asset in an active market is a Level 2 input because it is observable but not for the identical item. Identical-asset quoted prices are Level 1, while the entity's own forecasts and internal hurdle rates are unobservable Level 3 inputs.

  1. AQuoted price for an identical asset in an active market that the entity can access at the measurement date
  2. BQuoted price for a similar asset in an active market, adjusted where necessaryCorrect
  3. CThe entity's own cash flow forecasts used where no market data exists
  4. DA management estimate of the discount rate based on internal hurdle rates

Explanation

Level 2 inputs are observable inputs other than Level 1 quoted prices, such as quoted prices for similar assets in active markets. Quoted prices for identical assets are Level 1. Entity-specific forecasts and internal hurdle rates are unobservable and therefore Level 3.

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