How to measure fair value

In order to be awarded CPD units you must answer the following five random questions correctly. If you fail the test, please re-read the article before attempting the questions again.

  1. The guidance in IFRS 13 does not apply to transactions dealt with by certain standards. Which of the following standards would IFRS 13 apply to?

  2. Fair value has had a different meaning depending on the context and usage. What is the IASB's definition of fair value?

  3. Fair value is focused on the assumptions of the market place and is not entity specific. Which of the following assumptions does IFRS 13 take into account?

  4. The guidance includes enhanced disclosure requirements that could result in more work for reporting entities. Which of the following disclosures are not required by IFRS 13?

  5. IFRS 13 does not specify the unit of account for measuring fair value. This means that it is left to the individual standard to determine the unit of account for fair value measurement. What is meant by the 'unit of account'?

  6. Prices to be used under IFRS 13 are those in 'an orderly transaction'. what is meant by an orderly transaction?

  7. Fair value measurement assumes that the transaction to sell the asset or transfer the liability takes place in the principal market for the asset or liability. What is the definition of the principal market used in IFRS 13

  8. Fair value measurement assumes that the transaction to sell the asset or transfer the liability takes place in the principal market for the asset or liability or, in the absence of a principal market, in the most advantageous market for the asset or liability. What is the definition of the most advantageous market in IFRS 13?

  9. Fair value measurements are categorised into a three-level hierarchy, based on the type of inputs to the valuation techniques used. What inputs are required for a fair value measurement to be classified as level 1 inputs?

  10. Fair value measurements are categorised into a three-level hierarchy, based on the type of inputs to the valuation techniques used. What inputs are required for a fair value measurement to be classified as level 3 inputs?