Principal market
IFRS 13 fair value measurement assumes a transaction in the principal market if one exists and the entity can access it. If no principal market exists, use the most advantageous market, considering the amount received or paid after transaction and transport costs as specified by IFRS 13. The principal market is identified for the particular asset or liability, not simply the market with the best price.
Worked example
An entity can access markets A and B for an asset. A has the greatest volume and level of activity for that asset, while B offers a higher price. If A is the principal market under IFRS 13, the fair-value measurement uses market A rather than choosing B solely for its higher price.
Common mistake
Selecting the highest-price market whenever an accessible principal market exists, or treating the principal market as always the entity’s most recent trading venue.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FR | Supporting | September 2026–June 2027 |
| ACCA | SBR | Direct | September 2026–June 2027 |