Flashcards
Chapter 3 Fair value
Flashcards do conjunto (38)
- 1When IFRS 13 Fair value does not apply?IFRS 13 does not apply to share-based payment transactions within IFRS2 Share-based payment; leasing transactions within the scope of IAS17 Leases; and measurements that have similarities to, but are not, fair value, such as net realisable value in IAS 2 inventories or value in use in IAS36 Imapirment of assets
- 2What is definitiion of fair value?“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.”
- 3What is exit price?The price that would be received to sell an asset or paid to transfer a liability
- 4What is exit price based on?It is based on expectations about the future cash flows that will be generated by the asset subsequent to the sae or transfer of the liability.
- 5What is orderly transaction?An orderly transaction is not a forced or distressed sale. It assumes that, before the measurement date, there is sufficient time and exposure to a market to allow the usual marketing activities to take place for that transaction.
- 6How transaction and trasnportation costs affect fair value?The price used to measure fair value is not adjusted for transaction costs, but would consider transportation costs. Transaction costs are the incremental direct costs, that are essential to the transaction, to sell an asset or transfer a liability and are defined as the costs that would be incurred in the principal market and are directly attributable to the sale or transfer. Transportation costs are those that would be incurred to move the asset to the principal market.
- 7What is principal market for an asset?The market with the greatest volume and level of activity.
- 8What if none of markets if principal, how then choose the market?If none of the markets is the principal market for the asset, the fair value of the asset would be measured using the price in the most advantageous markets.
- 9Describe market approach for the measurement?The market approach: based on market transactions involving identical or similar assets and liabilities.
- 10Describe income approach for th emeasurement?• The income approach: based on future amounts that are converted to a single present amount. The fair value of an asset is not based on an observed market price but rather is generated by discounting the expected earnings from the use of the asset by a market participant.
- 11Describe cost approach for the measurement?• The cost approach: based on the amount required to replace the service capacity of an asset.
- 12What are inputs?“The assumptions that market participants would use when pricing the asset or liability, including assumptions about risk, such as the following:
(a) the risk inherent in a particular valuation technique used to measure fair value (such as a pricing model); and
(b) the risk inherent in the inputs to the valuation technique. - 13What are observable inputs?: Inputs that are developed using market data, such as publicly available information about actual events or transactions, and that reflect the assumptions that market participants would use when pricing the asset or liability.
- 14What are unobservble inputs?Inputs for which market data are not available and that are developed using the best information available about the assumptions that market participants would use when pricing the asset or liability.
- 15Describe inputs based on bid and ask prices?The price within a bid-ask spread that is most representative of fair value should be used to measure fair value.
- 16What is the 1st point of prioritising inputs?1. The inputs are prioritised into three levels – level 1, level 2 and level 3 inputs.
- 17What is the 2nd point of prioritising inputs?2. The fair value hierarchy gives the highest priority to quoted market prices in active markets for identical assets and liabilities and the lowest priority to unobservable inputs.
- 18What is the 3rd point in prioritising inputs?Inputs for which market data are not available and that are developed using the best information available about the assumptions that market participants would use when pricing the asset or liability.
- 19What is the 4th point in prioritising inputs?4. The availability of inputs and their relative subjectivity potentially affects the selection of the technique.
- 20How level 1 inputs are defined?Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date.
- 21What is active market?A market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.
- 22What are level 2 inputs?Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly.
- 23Provide 2 points of level 2 inputs.Quoted prices for similar assets or liabilities in active markets;
quoted prices for identical or similar assets or liabilities in active markets - 24Provide next 2 points of level 2 inputs.Inputs, other than quoted prices, that are observable for the asset or liability, such as interest rates;
inputs that are derived from, or corroborated, by observable market data by correlation or other means. - 25Provide examples of level 2 inputsFinished goods inventory at a retail outlet; building held and used;
cash-generating unit - 26What are level 3 inputs;Level 3 inputs are those that are unobservable
- 27Provide examples of level 3 inputs.Cash-generating unit;
trademark;
accounts receivable - 28What should be included in the fair value of non-financial asset?The highest and best use of the asset from a market participant perspective.
- 29What is the highest and best use of a non-financial asset?The use of a non-financial asset by market participants that would maximise the value of the asset or the group of assets and liabilities (e.g., a business) within which the asset would be used.
- 30What characteristics should hold highest and best use of asset?• Physically possible
• Legally permissible
• Financially feasible - 31What is stand-alone valuation premise?The fair value of the asset is the price that would be received in a current transaction to sell the asset to market participants who would use the asset on a stand-alone basis.
- 32What is in-combination valuation premise?The highest and best use of the asset is where the market participants obtain maximum value through using the asset in combination with other assets and liabilities.
- 33What is fair value of liability?A liability would remain outstanding and the market participant transferee would be required to fulfil the obligation. The liability would not be settled with the counterparty or otherwise extinguished on the measurement date.
- 34What is non-performance risk?The risk that an entity will not fulfil an obligation. Non-performance risk includes, but may not be limited to, an entity's own credit risk.
- 35How entity calcualtes fair valuem when there is no quoted price?• If the identical item is held by another party as an asset – measure fair value from the perspective of a market participant that holds the asset.
- 36How fair value is measured when identical item is not held by another party?measure the fair value using a valuation technique from the perspective of a market participant that owes the liability.
- 37In what order should the measurement of corresponding asset be?• The quoted price of the asset in an active market.
• The quoted price for the asset in a market that is not active
• A valuation under a technique, such as an income approach or a market approach. - 38page 65 should be added laterpage 65 should be added later
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- Financial accounting: IFRS application FlashCards sobre Chapter 3 Fair value, criado por Archimed Nemes em 23-12-2017.
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