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

Which of the following best describes the fair value definition in IFRS 13 Fair Value Measurement?

Fair value under IFRS 13 is the exit price: the amount received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It is market-based rather than entity-specific, and it is not an entry price or value in use.

  1. AThe 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 dateCorrect
  2. BThe price an entity would pay to acquire the asset in its current condition, including transaction costs
  3. CThe amount at which an asset could be exchanged between knowledgeable parties, adjusted for the entity's intended use
  4. DThe present value of the cash flows the entity expects to generate from using the asset

Explanation

IFRS 13 defines fair value as an exit price: the price received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The acquisition-price option describes an entry price, which IFRS 13 does not use. The value-in-use option is entity-specific, whereas fair value is market-based.

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