International Financial Reporting Standards
Quiz:
Assets: fair value
measurement
Joint World Bank and IFRS Foundation
‘train the trainers’ workshop hosted by the
ECCB, 30 April to 4 May 2012
The views expressed in this presentation are those of the
The
views expressed
in this
presentation
areor
those
presenter,
not necessarily
those
of the IASB
IFRSof the
presenter,
Foundation.
not necessarily those of the IASB or IFRS Foundation.
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
Quiz: Assets fair value measurement
2
Question 1: Which of the following is NOT
relevant when measuring the fair value of an
asset?
a. Whether the asset is sold in an orderly
transaction
b. The intention of an entity for holding an asset
c. The measurement date/current price of the
asset
d. Whether the sale occurred between market
participants
e. None of the above
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org
Quiz: Assets fair value measurement
3
Question 1: Which of the following is NOT
relevant when measuring the fair value of an
asset?
a. Whether the asset is sold in an orderly
transaction
b. The intention of an entity for holding an asset
c. The measurement date/current price of the
asset
d. Whether the sale occurred between market
participants
e. None of the above
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org
Quiz: Assets fair value measurement
4
Question 2: Which of the following are
examples of transaction costs in accordance
with IFRS 13?
a. transport costs
b. transfer duty
c. finance costs
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org
Quiz: Assets fair value measurement
5
Question 2: Which of the following are
examples of transaction costs in accordance
with IFRS 13?
a. transport costs
b. transfer duty
c. finance costs
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org
Quiz: Assets fair value measurement
6
Question 3: In measuring the price (or fair
value) in an orderly transaction, how should an
entity account for transaction costs?
a. adjust fair value for transaction costs
b. ignore transaction costs when measuring fair
value
c. the decision is asset-specific
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org
Quiz: Assets fair value measurement
7
Question 3: In measuring the price (or fair
value) in an orderly transaction, how should an
entity account for transaction costs?
a. adjust fair value for transaction costs
b. ignore transaction costs when measuring fair
value
c. the decision is asset-specific
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org
Quiz: Assets fair value measurement
8
Question 4: When measuring the fair value of a
non-financial asset, reference must be made to the
highest and best use of the asset. Which of the
following statements are true about the highest and
best use of the asset?
a. the use must be physically possible, legally
permissible and financially feasible
b. the highest and best use is determined from the
perspective of market participants, only if the entity
intends to use the asset in its operations
c. the highest and best use is determined from the
perspective of market participants, regardless of
whether the entity intends to use the asset
d. a. and c.
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org
Quiz: Assets fair value measurement
9
Question 4: When measuring the fair value of a
non-financial asset, reference must be made to the
highest and best use of the asset. Which of the
following statements are true about the highest and
best use of the asset?
a. the use must be physically possible, legally
permissible and financially feasible
b. the highest and best use is determined from the
perspective of market participants, only if the entity
intends to use the asset in its operations
c. the highest and best use is determined from the
perspective of market participants, regardless of
whether the entity intends to use the asset
d. a. and c.
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org
Quiz: Assets fair value measurement
10
• Question 5: The assessment of the fair value of
an entity’s financial instruments includes
observable market information for a similar
instrument and our own assumptions.
In what level would this be categorised?
a. Level 1
b. Level 2
c. Level 3
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org
Quiz: Assets fair value measurement
11
• Question 5:
In what level would this be categorised?
a. Level 1
b. Level 2 OR
c. Level 3
If the valuation technique uses inputs from multiple levels of the fair
value hierarchy, the lowest level of significant input determines the
level of the entire fair value measurement in the hierarchy.
The appropriate level depends on the significance to the overall
measurement of the company’s own assumptions.
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org
Quiz: Assets fair value measurement
12
• Question 6: How would you categorise the
following?
Unit 1:
Unit 2:
A unit in an investment fund is quoted in
an active market. However the
underlying investments are in unquoted
equities that would be categorised within
Level 3 in the fair value hierarchy.
A unit in a non-quoted investment fund
which only invests in financial assets
quoted in active markets. No
adjustments are made to the quoted
prices when arriving at the value of the
fund.
A.
B.
C.
D.
Unit 1
Level 1
Level 1
Level 2
Level 3
Unit 2
Level 1
Level 2
Level 1
Level 2
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org
Quiz: Assets fair value measurement
13
• Question 6: How would you categorise the
following?
b. Level 1 and Level 2
Unit 1:
Unit 2:
• Level 1.
• Level 2.
• This is because the fund’s units are
quoted in an active market.
• Although the fund’s investments are
quoted, the fund’s own units are not.
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org
Quiz: Assets fair value measurement
14
Question 7
A building is used as a factory but is in a newly residential area. Other industrial
and commercial buildings have been converted into residential use in the area.
Based on expected future cash flows from use as a factory, the entity estimates
a value of CU20m. However, the building could be sold for conversion to
residential property for CU21m, incurring transaction costs of CU1.5m (surveys,
fees etc). Prior to sale, the building would require repairs costing CU500k to
return site to safe for human dwelling.
What is the Fair Value of the building?
a.
b.
c.
d.
CU19m
CU19.5m
CU20.5m
CU21m
© IFRS
2011 IFRS
Foundation
Foundation.
| 30 Cannon
30 Cannon
StreetStreet
| London
| London
EC4M
EC4M
6XH 6XH
| UK.| www.ifrs.org
UK. www.ifrs.org
Quiz: Assets fair value measurement
15
Question 7
c.
CU20.5m
• “Highest and Best Use” is the highest value achieved through either current or
alternative use.
• The value is calculated net of repair cost but not transaction costs.
© IFRS
2011 IFRS
Foundation
Foundation.
| 30 Cannon
30 Cannon
StreetStreet
| London
| London
EC4M
EC4M
6XH 6XH
| UK.| www.ifrs.org
UK. www.ifrs.org
Questions or comments?
Expressions of individual views
by members of the IASB and its
staff are encouraged.
The views expressed in this
presentation are those of the
presenter.
Official positions of the IASB on
accounting matters are
determined only after extensive
due process and deliberation.
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org
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The requirements are set out in International Financial
Reporting Standards (IFRSs), as issued by the IASB at
1 January 2012 with an effective date after 1 January
2012 but not the IFRSs they will replace.
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