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IFRS13 – Level 1 or Level 2

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › IFRS13 – Level 1 or Level 2

  • This topic has 5 replies, 2 voices, and was last updated 1 year ago by Stephen Widberg.
Viewing 6 posts - 1 through 6 (of 6 total)
  • Author
    Posts
  • November 15, 2015 at 12:53 pm #282538
    Sheryar
    Member
    • Topics: 33
    • Replies: 18
    • ☆☆

    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 ??????

    November 15, 2015 at 3:12 pm #282563
    MikeLittle
    Keymaster
    • Topics: 26
    • Replies: 22707
    • ☆☆☆☆☆

    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?

    November 15, 2015 at 3:37 pm #282570
    Sheryar
    Member
    • Topics: 33
    • Replies: 18
    • ☆☆

    inactive

    November 15, 2015 at 3:49 pm #282574
    MikeLittle
    Keymaster
    • Topics: 26
    • Replies: 22707
    • ☆☆☆☆☆

    I’m not sure that I agree – I suppose that depends upon your interpretation of the words “active” and “inactive”

    January 18, 2022 at 7:16 am #646835
    nurjiwa
    Member
    • Topics: 4
    • Replies: 5
    • ☆

    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” ?

    January 18, 2022 at 10:28 am #646857
    Stephen Widberg
    Keymaster
    • Topics: 12
    • Replies: 2843
    • ☆☆☆☆☆

    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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