IFRS 13 Fair Value Measurement
IFRS 13 defines fair value, sets out a framework for measuring it, and requires disclosures about fair value measurements. Its US GAAP counterpart is ASC 820.
Related Standards
Explanation
Fair value is the 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 date – an exit price.
IFRS 13 uses a fair value hierarchy:
• Level 1: quoted prices in active markets for identical assets or liabilities,
• Level 2: observable inputs other than Level 1 prices,
• Level 3: unobservable inputs based on the company's own assumptions.
IFRS 13 does not determine when fair value is required; other standards do. Its measurement and disclosure requirements do not apply to leasing transactions accounted for under IFRS 16.
Why It Matters
For lessors, the fair value of the underlying asset is a key input for lease classification and for determining the interest rate implicit in the lease. Under US GAAP, ASC 842 refers to fair value as defined in ASC 820, with a cost-based exception for lessors that are not manufacturers or dealers. Under IFRS, IFRS 16 uses its own fair value definition instead of IFRS 13. Impairment testing under IAS 36 (fair value less costs of disposal) does follow IFRS 13. Consistent fair value data improves the reliability of classification and profit recognition.
Related Terms
Interest Rate Implicit in the Lease · Finance Lease · Sales-Type Lease · IAS 36
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