pfrs 13

Question 1

What is fair value?

Answer 1

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Defined in PFRS 13

Question 2

What is the scope of PFRS 13?

Answer 2

Applies to the fair value measurement and related disclosures of an asset, liability, or equity when other PFRSs require measurement at fair value or fair value less costs to sell.

PFRS refers to Philippine Financial Reporting Standards

Question 3

What are the principles used in measuring fair value?

Answer 3

Based on the market price of the asset in:
* a principal market
* the most advantageous market (in the absence of a principal market)

The market price is not adjusted for transaction costs but is adjusted for transport costs.

Question 4

What does the fair value hierarchy Level 1 consist of?

Answer 4

Observable inputs that reflect quoted prices for identical assets or liabilities in active markets.

Most reliable level in the fair value hierarchy

Question 5

What does the fair value hierarchy Level 2 consist of?

Answer 5

Inputs other than quoted prices included in Level 1 that are observable for the asset or liability either directly or through corroboration with observable data.

Less reliable than Level 1

Question 6

What does the fair value hierarchy Level 3 consist of?

Answer 6

Unobservable inputs (for example, an entity’s own data or assumptions).

Least reliable level in the fair value hierarchy

Question 7

Fill in the blank: Fair value is based on the market price of the asset in a _______ market or the most advantageous market.

Question 8

True or False: The market price used in measuring fair value is adjusted for transaction costs.

Answer 8

False

Fair value is not adjusted for transaction costs.