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Hi, was reading through bpp’s chapter 3 (non current asset) when i stumble upon this sentence ” the asset should be revalued to fair value, using the fair value hierarchy in ifrs 13″. Could you help explain that how does one use fair value hierarchy in revalue asset to fair value?
Thank you very much kind sir ^^
Whenever something is measured at fair value, IFRS 13 is the reference standard (unless another standard specifies otherwise). This means that you should use level 1 inputs (i.e. quoted prices in active markets for an identical item) wherever possible. The use of level 3 inputs, which are unobservable, should be kept to a minimum.
If you were revaluing an investment property, for example, you won’t have an identical asset but you might have similar properties in the same area and you might use a mid-value or average of recent prices per square metre as a basis.So the fair value hierarchy is just there to clarify to the investor what level that the company is using to determine its fair value ?
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