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Janne measures its industrial investment property using the fair value method, which is measured using the ‘new-build value less obsolescence’. Valuations are conducted by a member of the board of directors. In order to determine the obsolescence, the board member takes account of the age of the property and the nature of its use. According to the board, this method of calculation is complex but gives a very precise result, which is
accepted by the industry. There are sales values for similar properties in similar locations available as well as market rent data per square metre for similar industrial buildings.Sales value for similar properties in similar locations avaialble would be treated as level 1 input or level 2 input as per ifrs 13 ??????
Extract from IFRS 13: “A quoted market price in an active market provides the most reliable evidence of fair value and is used without adjustment to measure fair value whenever available”
It really comes down to the particular situation in which the entity finds itself.
It’s arguable that we’re looking at a level 1, but it’s equally arguable that it’s a level 2
Level 1 relates to prices quoted in active markets where level 2 relates to prices quoted other than in active markets
You tell me – is the transfer of industrial properties active or inactive?
I’m not sure that I agree – I suppose that depends upon your interpretation of the words “active” and “inactive”
Hi,
May I know why in IFRS 13, the “new build value less obsolescence” cannot be used ? Does “new build value less obsolescence” meant “cost – depreciation” ?Sounds like depreciated replacement cost, which used to be:
1. Popular in the 1980s
2. Used to revalue specialised asset (e.g. an iron foundry)I would have thought that a Level 3 valuation (IFRS 13) might be better – based on expected future cash flows. (I always thought that mixing current cost of a new asset with historic depreciation was a bit odd).
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