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Hi
I am struggling with the concepts of FV measurement under IFRS 13.I understand the three valuation techniques level 1 2 and 3. But then I am struggling to see where the principal market/advantageous market comes in?
I can’t piece it all together so a summary would be really useful. The video I have just watched only covers the three inputs.
Under IFRS 13, management determines fair value based on a hypothetical transaction that would take place in the principal market or, in its absence, the most advantageous market
The principal market is the market with the greatest volume and level of activity for the asset.
The most advant.ageous market is the market that maximises the amount that would be received to sell the asset
In evaluating principal or most advantageous markets, IFRS 13 restricts the eligible markets to only those that the entity can access at the measurement date.
Thanks to PWC for the above – if you understand these points, you will be fine.
Hmm ok understood but how do you know whether to use the fair value hierarchy, the principal/most advantageous market or the highest and best use?
I have done a question on investment properties and i said to use the highest and best use for the fair value amount, but in the answer they have said about the fair value hierarchy, which i thought was only to value shares.
Thanks
FV hierarchy is for anything.
Investment properties:
– FV of similar IP = Level 2
– valuation based on future rental income = Level 3
As always preferable to use Level 2Ok understood, so the hierarchy is the best method, highest and best use is only for non financial assets and then when would you use principal market/ most advantageous?
Sorry – for so many questions.
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