Comments by the British Accounting Association
Special Interest Group in Financial Accounting and
Reporting on the IASB Exposure Draft ‘Fair Value
Measurement’
The Financial Accounting and Reporting Special Interest Group (FARSIG) is a
special interest group of the British Accounting Association (BAA). Its technical
committee is charged with commenting on Exposure Drafts and Discussion Papers
issued by standard setters on issues relating to financial accounting and reporting. Its
views represent those of its members and not those of the BAA.
The BAA is the representative body for UK accounting academics and others
interested in the study of accounting and finance in the UK. The BAA Financial
Accounting and Reporting Special Interest Group is the BAA’s designated group
specialising in issues relating to financial reporting. This response has been
formulated by Geoffrey Whittington and Mike Page with comments from Mike Jones
and Stella Fearnley and has been approved by the Technical Committee of the Special
Interest Group.
Introductory Comments
Our comments on the Discussion Paper (DP) ‘Fair Value Measurement’ that preceded
this exposure draft (ED) explained our fundamental disagreement with many of the
assumptions made in it. These assumptions have been carried over to the ED and so
are still relevant. Hence, our previous comments appear in the Appendix. Here, we
concentrate particularly on features of the ED.
Our previous criticisms of the DP stemmed from a belief that the pursuit of non-entity
specific measures is inappropriate. We believe that reflecting the specific economic
opportunities available to the entity is appropriate to understanding its financial
performance and position. Moreover, the pursuit of hypothetical market values in the
cause of being non-entity specific is likely to impair the reliability and clarity of
measurement.
The choice of exit values as the single fair value objective is of particular concern.
The ED goes some way to meeting this in 38 (c ) and BC 63, where its support of ‘the
economic principle of substitution’ gives rise to what looks very much like deprival
value for a wide range of fixed assets. We believe that deprival value, by selecting
from the available opportunities, is consistent with our view of a useful measurement
objective. However, the ED goes on (in BC 65-66) to reject the deprival value
approach on the grounds that it is entity specific, despite the fact that, in practice, it
will often lead to the same result as the ED’s approach to fair value.
One difference between deprival value and fair value that is not referred to is
transaction costs. Under a deprival value approach transaction costs should be
included in measurement because they are necessary to access the benefits being
measured. For example, under the deprival value approach sale value is measured as
net realisable value, price less selling cost, whereas fair value ignores selling cost. The
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ED advances some confusing and apparently contradictory reasons for excluding
transaction costs. For example, transaction costs are (rightly) recognised in selecting
the most advantageous market (8) but are not included in the value measure derived
from the market. BC47 attempts to justify the exclusion of transaction costs from fair
value on the ground that they are ‘a characteristic of the transaction’ rather than the
asset or liability. Surely, price also is a characteristic of the transaction, so that too
should be excluded if we follow this argument to its logical conclusion.
The concept of the market participant continues to be a troublesome element in the
ED. The basic problem is that it is difficult to define the market participant
operationally without introducing a significant entity specific element. The effort to
achieve this adds a great deal of complication and is ultimately unsuccessful, and in
our view the endeavour is not necessary. For example, the market participant is
(correctly) supposed to be in a market defined by the entity’s opportunities (14 (c)),
which is entity specific. It is also assumed to be as knowledgeable as the entity (13(b),
that knowledge also being entity specific) and is assumed to be able to obtain this
information by due diligence, which in turn is achieved so cheaply that its cost does
not affect the price. In practice, it seems to us that the ‘in use’ premise will usually
lead to a measure of value in use, as defined in IAS 36. We regard such a measure as
useful and disagree with BC 64’s apparent belief that a non-entity specific measure is
either theoretically superior or practically useful.
The analysis of market participants is largely conducted as if all participants were the
same, whereas in practice market participants vary widely in role (e.g. dealer v
consumer) and reputation. Only at 14(c) is it conceded that the buyer is to be assumed
to be one the entity would transact with. This is highly entity specific and in most
cases leads to a price that is the entity specific price.
Finally, assuming market participants are as knowledgeable as the entity about its
assets and liabilities vitiates the need for financial information about the entity in the
form of financial reports.
Answers to specific questions
Definition of fair value and related guidance
Q1. The exposure draft proposes defining fair value as ‘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’ (an exit price) (see paragraph 1 of the draft IFRS and paragraphs
BC15–BC18 of the Basis for Conclusions). This definition is relevant
only when fair value is used in IFRSs. Is this definition appropriate? Why
or why not? If not, what would be a better definition and why?
No. Different valuations are needed for different purposes and in different
circumstances, reflecting the opportunities available to the specific entity. We explain
in our earlier discussion our views on the lack of clarity in market assumptions and
the problems of defining which market is applicable.
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Scope
Q2. In three contexts, IFRSs use the term ‘fair value’ in a way that does
not reflect the Board’s intended measurement objective in those
contexts: (a) In two of those contexts, the exposure draft proposes to
replace the term ‘fair value’ (the measurement of share-based payment
transactions in IFRS 2 Share-based Payment and reacquired rights in
IFRS 3 Business Combinations) (see paragraph BC29 of the Basis for
Conclusions). (b) The third context is the requirement in paragraph 49 of
IAS 39 Financial Instruments: Recognition and Measurement that the fair
value of a financial liability with a demand feature is not less than the
amount payable on demand, discounted from the first date that the
amount could be required to be paid (see paragraph 2 of the draft IFRS
and paragraph BC29 of the Basis for Conclusions). The exposure draft
proposes not to replace that use of the term ‘fair value’, but instead
proposes to exclude that requirement from the scope of the IFRS. Is the
proposed approach to these three issues appropriate? Why or why not?
Should the Board consider similar approaches in any other contexts? If
so, in which context and why?
The need for these exceptions demonstrates the imprecision of the Board’s past
approach to fair value. In particular there should be a scoping out of other instances
where IFRSs use fair value to measure an entry transaction such as leasing and
business combinations.
The requirement that liabilities for demand deposits have a floor on their value is
equivalent to saying that valuations should not take account of own credit risk.
Removing this requirement is an important change to another standard which should
not be made as a side-effect of a new definition of fair value.
The transaction
Q3. The exposure draft proposes that a fair value measurement
assumes that the transaction to sell the asset or transfer the liability
takes place in the most advantageous market to which the entity has
access (see paragraphs 8–12 of the draft IFRS and paragraphs BC37–
BC41 of the Basis for Conclusions). Is this approach appropriate? Why
or why not?
It is not clear why this assumption is made rather than choosing the market in which
the item is most likely to be transacted by the entity, which would be a better guide to
prospective cash flows. The most advantageous market may be more consistent with
the non-entity specific objective of fair value, but we note that the choice of market
inevitably has an entity specific component (as in 14(c)).
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Q4. The exposure draft proposes that an entity should determine fair
value using the assumptions that market participants would use in
pricing the asset or liability (see paragraphs 13 and 14 of the draft IFRS
and paragraphs BC42–BC45 of the Basis for Conclusions). Is the
description of market participants adequately described in the context
of the definition? Why or why not?
As indicated in our introductory comments, we find the concept of the market
participant to be unsatisfactory theoretically. The problem is thus one of concept
rather than mere definition.
The description of market participants includes the assumption that they have the
same knowledge set (‘as knowledgeable as’) as the entity. Information asymmetry is a
critical factor in real markets as Akerloff (market for lemons) and many others have
pointed out. The implications of this assumption do not seem to have been worked
through in the ED or BC. For example the entity may have much information about its
business that is relevant to ‘in-use’ valuation, or even its own debt, or securities it
owns in associated companies that is not available to the market. The definition also
imports a large degree of entity specificity into valuation. If the market participant has
the same knowledge and opportunities as the entity, it is difficult to understand the
nature of any non-entity specific component that will be unique to the market
participant.
The ‘due diligence’ that market participants are expected to undertake (BC45) is a
transaction cost that would be factored into the price.
Furthermore, market participants are not homogeneous. Real markets are often
composed of dealers and customers with varying reputations and market power. The
reference in 14 (c) to ‘market participants with whom the reporting entity would enter
into a transaction in that market’ is another example of an entity specific
consideration.
Application to assets: highest and best use and valuation premise
Q5. The exposure draft proposes that: (a) the fair value of an asset
should consider a market participant’s ability to generate economic
benefit by using the asset or by selling it to another market participant
who will use the asset in its highest and best use (see paragraphs 17–19
of the draft IFRS and paragraph BC60 of the Basis for Conclusions); (b)
the highest and best use of an asset establishes the valuation premise,
which may be either ‘in use’ or ‘in exchange’ (see paragraphs 22 and 23
of the draft IFRS and paragraphs BC56 and BC57 of the Basis for
Conclusions); (c) the notions of highest and best use and valuation
premise are not used for financial assets and are not relevant for
liabilities (see paragraph 24 of the draft IFRS and paragraphs BC51 and
BC52 of the Basis for Conclusions). Are these proposals appropriate?
Why or why not?
The ‘highest and best use’ criterion is not appropriate on its own because it could lead
to some rather speculative high valuations in the (probably common) case where
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subjective value in use is higher than selling value. BC 63 solves this by using a
deprival value approach (calling it ‘the economic principle of substitution’), making
replacement cost a ceiling on value. It would be an improvement if the ED adopted
this principle more generally.
It is not clear what principle, if any, underlies the differential treatment of financial
assts and liabilities. The reasons given seem to be pragmatic and better dealt with at
the level of the specific standards. At present, the reasons in the BC are unconvincing.
It is not at all clear, for example, that liabilities for environmental restoration cannot
have different values ‘in use’ and ‘in exchange’. Equally, it is not clear that loan
assets might not be expected to have different values in use and in exchange. Such
differences may be attributable partly to information asymmetries (which the ED
unrealistically assumes away) but also to management (e.g. debt collection).
Q6. When an entity uses an asset together with other assets in a way
that differs from the highest and best use of the asset, the exposure
draft proposes that the entity should separate the fair value of the asset
group into two components: (a) the value of the assets assuming their
current use and (b) the amount by which that value differs from the fair
value of the assets (i.e. their incremental value). The entity should
recognise the incremental value together with the asset to which it
relates (see paragraphs 20 and 21 of the draft IFRS and paragraphs
BC54 and BC55 of the Basis for Conclusions). Is the proposed guidance
sufficient and appropriate? If not, why?
We support the concepts underlying this approach but it may be burdensome to apply
in practice. This may limit the circumstances in which the cost-benefit test allows the
use of fair value in specific standards.
The guidance is not clear as to whether the incremental component should be reported
separately (IE8) and how this might be done.
It is not clear, for example when measuring impairments, how gains and losses would
be accounted for. Separation of valuations into components raises the possibility that
changes in components could give rise to separate gains and losses and that the
changes might be treated differently. While it may be up to individual standards to
deal with these changes, preparers will need guidance in the interim.
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Application to liabilities: general principles
Q7. The exposure draft proposes that: (a) a fair value measurement
assumes that the liability is transferred to a market participant at the
measurement date (see paragraph 25 of the draft IFRS and paragraphs
BC67 and BC68 of the Basis for Conclusions); (b) if there is an active
market for transactions between parties who hold a financial instrument
as an asset, the observed price in that market represents the fair value
of the issuer’s liability. An entity adjusts the observed price for the asset
for features that are present in the asset but not present in the liability or
vice versa (see paragraph 27 of the draft IFRS and paragraph BC72 of
the Basis for Conclusions); (c) if there is no corresponding asset for a
liability (e.g. for a decommissioning liability assumed in a business
combination), an entity estimates the price that market participants
would demand to assume the liability using present value techniques or
other valuation techniques. One of the main inputs to those techniques
is an estimate of the cash flows that the entity would incur in fulfilling
the obligation, adjusted for any differences between those cash flows
and the cash flows that other market participants would incur (see
paragraph 28 of the draft IFRS). Are these proposals appropriate? Why
or why not? Are you aware of any circumstances in which the fair value
of a liability held by one party is not represented by the fair value of the
financial instrument held as an asset by another party?
With regard to (c), we are in favour of entity specific measurement and would not
adjust a liability for hypothetical prices that market participants would demand, unless
it was possible to obtain price quotations from market participants with whom the
entity could transact.
In practice, information asymmetry and differential market access will mean that the
estimated value to one party is different from that of the counter-party. For example, a
mortgage may be written down to a low value in the lender’s books, but the borrower,
who has no market reference price and expects to meet the obligations, may estimate
the value to be much higher on a discounted cash flow basis.
Application to liabilities: non-performance risk and restrictions
Q8. The exposure draft proposes that: (a) the fair value of a liability
reflects non-performance risk, i.e. the risk that an entity will not fulfil the
obligation (see paragraphs 29 and 30 of the draft IFRS and paragraphs
BC73 and BC74 of the Basis for Conclusions); (b) the fair value of a
liability is not affected by a restriction on an entity’s ability to transfer
the liability (see paragraph 31 of the draft IFRS and paragraph BC75 of
the Basis for Conclusions). Are these proposals appropriate? Why or
why not?
(a) is appropriate, if we accept the definition of fair value, but it means that fair value
needs to be used in specific standards with caution, e.g. it will be necessary to identify
separately ‘gains’ arising from changes in own credit risk.
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(b) is contentious. The ability to transfer is a critical requirement for the ability to
sell, so restrictions on transfer must be relevant to selling price. Fair value is a selling
price and must be affected by such restrictions. BC75 seems to deny that the fair value
of a liability is a price.
Fair value at initial recognition
Q9. The exposure draft lists four cases in which the fair value of an
asset or liability at initial recognition might differ from the transaction
price. An entity would recognise any resulting gain or loss unless the
relevant IFRS for the asset or liability requires otherwise. For example,
as already required by IAS 39, on initial recognition of a financial
instrument, an entity would recognise the difference between the
transaction price and the fair value as a gain or loss only if that fair
value is evidenced by observable market prices or, when using a
valuation technique, solely by observable market data (see paragraphs
36 and 37 of the draft IFRS, paragraphs D27 and D32 of Appendix D and
paragraphs BC76–BC79 of the Basis for Conclusions). Is this proposal
appropriate? In which situation(s) would it not be appropriate and why?
We would prefer to recognise an asset or liability at initial transaction value until
another transaction or event occurred that justified a gain, except where there was
compelling evidence of a bargain purchase. Switching markets (from wholesale to
retail) would not constitute such evidence, and neither would the use of models, even
using market inputs.
Valuation techniques
Q10. The exposure draft proposes guidance on valuation techniques,
including specific guidance on markets that are no longer active (see
paragraphs 38–55 of the draft IFRS, paragraphs B5–B18 of Appendix B,
paragraphs BC80–BC97 of the Basis for Conclusions and paragraphs
IE10–IE21 and IE28–IE38 of the draft illustrative examples). Is this
proposed guidance appropriate and sufficient? Why or why not?
Our original concerns (Appendix paragraph 7) remain. Measurements at the different
levels are based on such incommensurable assumptions that it seems misleading to
apply the same description (fair value) to them.
The ED represents a brave attempt to achieve the impossible. If exit markets do not
exist, it is not possible to create exit prices that have real meaning and it is necessary
to resort to other measures, without pretending that they relate to arm’s-length market
transactions between fully informed participants.
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Disclosures
Q11. The exposure draft proposes disclosure requirements to enable
users of financial statements to assess the methods and inputs used to
develop fair value measurements and, for fair value measurements
using significant unobservable inputs (Level 3), the effect of the
measurements on profit or loss or other comprehensive income for the
period (see paragraphs 56–61 of the draft IFRS and paragraphs BC98–
BC106 of the Basis for Conclusions). Are these proposals appropriate?
Why or why not?
The answer to question 10 applies. Particularly at level 3, it might be better to admit
defeat and recognise that this is no longer Fair Value as defined at the beginning of
the ED.
Convergence with US GAAP
Q12. The exposure draft differs from Statement of Financial Accounting
Standards No. 157 Fair Value Measurements (SFAS 157) in some
respects (see paragraph BC110 of the Basis for Conclusions). The
Board believes that these differences result in improvements over SFAS
157. Do you agree that the approach that the exposure draft proposes
for those issues is more appropriate than the approach in SFAS 157?
Why or why not? Are there other differences that have not been
identified and could result in significant differences in practice?
Our main concern is that SFAS 157 was an inappropriate starting place for this
project, so we have no objection in principle to deviations from it. Most of the
deviations are quite small and where they are considered significant we have referred
to them in answers to questions or in the introductory comments.
Other comments
Q13. Do you have any other comments on the proposals in the exposure
draft?
See our introductory comments and the Appendix.
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Appendix: BAA FARSIG Discussion of Principal
Issues Raised by the IASB/FASB Discussion Paper
that Preceded the Current Exposure Draft
Pre-emption of the Conceptual Framework Project
1. The proposal precedes a proper consideration of the principles of
measurement, which is to be part of the Conceptual Framework project. It is
claimed that, because it relates only to the application of fair value where
IFRS already require its use, the present proposal does not pre-empt the latter
project. However, by changing the definition of fair value in IFRS, the present
proposal is seeking fundamental changes in the way fair value is applied in
current standards (otherwise there would be no point in making the
proposals).Moreover, the scope of application of fair value is broader in IFRS
than in FASB standards, so that the scope of application of the new definition
may be broader than was considered in the development of SFAS 157. Such
changes should not be made in advance of the debate on conceptual
framework measurement issues.
2. The particular changes in the definition of fair value that are proposed and
with which we disagree are, respectively, that fair value is necessarily a price
rather than an amount, and that fair value is an exit value rather than, in some
circumstances, an entry value: ‘the price that would be received to sell an
asset or paid to transfer a liability’. The reasons for our disagreement are set
out below.
Failure to justify choice of exit value
3. The choice of the exit market rather than the entry market or a combination of
the two (as, for example, in the deprival value model) is, in our view, not
adequately justified in the paper. This is a fundamental change in the
definition of fair value as it has previously been understood by standard
setters. Previously, fair value was taken to be a current market value (as in the
present IASB definition) but without limitation as to the reference market, e.g.
the UK standard on business combinations, which introduced the term fair
value to the UK standards, suggested that replacement cost, capped by
recoverable amount, was an appropriate measure of fair value.
4. The paper’s preference for exit value seems to be based on the belief that this
measures the capacity to generate future cash flows better than alternative
measures. This belief is not justified in the paper, and we believe it to be
mistaken. In some circumstances, an exit value may be a useful indicator of
future cash flows, e.g. in the case of some financial instruments that are held
for sale. In other cases, an entry value such as replacement cost may be more
useful, e.g. in the case of the fixed assets of a manufacturing business, where
the cash flow attributable to the asset is the acquisition cost of the asset that is
avoided by already owning it. These arguments have been developed in a
large and important body of academic literature which is entirely ignored in
the paper.
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5. The definition of exit value in the paper is unclear, particularly in relation to
value in use. The chosen value is supposed to represent the highest that an
arms-length market participant would pay for the asset. However, this market
participant would not pay the full value obtained from this ‘highest and best
use’, because, in a competitive market, alternative suppliers would be
available. From these, the market participant would select the lowest cost
alternative, the difference between the cost and the value to the purchaser
being consumer surplus. Hence, fair value can be interpreted, in the situation
where a market participant’s behaviour is modelled, as an entry value
approach [lowest cost, not value in highest and best use], but the paper is
insistent that an entry value approach is not relevant.
6. Put another way, it is not clear why the universal use of an exit value is
supposed to help users of financial statements, in particular to help providers
of finance, make allocation decisions. Except in the case that an entity is
considering disposing of an item in a market, rather than realising it through
use, it is not clear what relevance the exit market price of the asset has to
users. In particular it is not clear why the selection of such a price should be
‘non-entity specific’. For all practical considerations, users would like to
know values that represent the actual opportunities that are available to the
entity in its specific circumstances. SFAS 157 seems to adopt this stance in
allowing the entity’s preferred market to prevail over the most advantageous
market, but it does not extend it to allowing entry rather than exit prices for
assets of which the entity is typically a buyer rather than a seller.
Lack of clarity in market assumptions
7. The market assumptions of the paper are extremely unclear. To what extent
does the assumption of a market comprised of ‘knowledgeable and willing
parties’ imply that the market is fully informed? It seems implicit in the paper
that the most desirable exit price for users’ purposes would be the price set in
a perfect market, except in the case that the item is held for disposal, where,
we agree, the expected realisation would be useful information. However, in
real markets, imperfections and information asymmetry are important, (see for
example Akerlof’s analysis of ‘the market for lemons’). It follows that real
world prices (level 1) may not provide acceptable approximations to
hypothetical perfect market prices. Level 2 prices, that rely on models
informed by markets, are often attempting to approximate prices in perfect
markets so may differ substantially from level 1 prices. At level 3, models
seem to be assuming that, in perfect markets, prices will be set at the net
present value of future cash flows. However, where markets are sensitive to
supply and demand, the average purchaser enjoys a consumer surplus – that is
to say, for productive assets, prices are lower than the expected net present
value of future cash flows enjoyed by purchasers.
8. Finally, the concept of a market in an item breaks down for other reasons such
as moral hazard. In the case of moral hazard, it is possible that there would be
no purchaser for some items because the seller could then take actions which
decreased the value of the asset or increased the value of the liability – for
example there is no market in the total liabilities of active defined benefit
pension schemes based on terminal salaries because employers could increase
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the salaries of staff without bearing the pension costs. (It is possible that a
restricted market could exist for liabilities that were constrained in some way
– but those are different from the liabilities firms actually have.)
Transaction Costs
9. With regard to the change from amount to price, this clarifies that fair value is
not intended to include transaction costs. This is consistent with the current
interpretation of fair value in those IASB standards such as IAS41, which
refer to ‘fair value, less cost to sell’. However, the use of fair value in several
earlier standards did not make clear that transaction costs were to be treated
separately, so that it is likely that the new standard will change practice. Such
a change, by creating measurements based on price rather than realisable
amounts (or, in the case of entry values, acquisition costs) takes the
measurement basis away from the actual cash flows represented by the assets.
Transaction costs reduce the cash obtainable from realisation and, in the case
of entry values, increase the cash flow which is avoided by owning the asset
rather than having to acquire it.
10. The difficulty of ignoring transaction costs is illustrated by the paper’s
pragmatic treatment of the bid-ask spread in a dealer market. This is a
transaction cost: the dealer’s substitute for a broker’s commission. The logical
price to choose on the paper’s exit value criterion would be the bid price;
alternatively, if entry value were the objective, it would be the ask price.
These represent not only third party market prices but also amounts that are
realisable (or avoidable). The discussion paper, however, seems to be intent
on ignoring transaction costs and identifying a market price that does not
include them, even if such a price does not exist. It therefore adopts a
pragmatic stance that the price at which the entity would actually deal, or
estimates that it would deal, is the appropriate one. This seems to breach one
of the paper’s basic precepts, that entity specific assumptions should not affect
the measurement of fair value. The paper is based on the assumption that fair
value is based on the price determined by independent third parties trading in
the market, not the price that the entity might obtain by virtue of its special
position. We do not agree with the paper’s rejection of entity specific
assumptions, but we do feel that they should not be introduced casually to
cover up flaws in the basic analysis (in this case, the treatment of transaction
costs).
Initial Remeasurement
11. The ‘day 1 profit’ issue identified in the paper is related to the choice of exit
value as the basis of fair value. Because exit value can, and in most cases will,
differ from entry value as reflected in the acquisition consideration, a profit or
loss can arise on initial recognition of an asset. We acknowledge that, in some
cases, there will be bargain purchases or onerous purchases, where the
acquisition consideration is not on market terms. In such cases the ‘day 1’
gain or loss on the purchase transaction should be recognised immediately
because it is a direct consequence of the transaction.
12. In other cases, however, the ‘day 1’ gain or loss is merely an artefact of the
measurement rules, which require switching from the purchase (entry) price to
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the sale (exit) price at the point of purchase rather than the point of sale. In so
doing there may be several effects at work. The reference market may have
changed – e.g. to a market for second-hand assets from a market for new ones.
Information asymmetry may have become more, or less, important so that
observed ‘real world’ prices may be very different from theoretical, perfect
market prices. We believe that this immediate switch from entry to exit prices
on initial recognition represents a fundamental change in the existing
recognition criteria for revenue, which should not be made as part of a
standard that is merely intended to tidy up current practice.
Which Market?
13. The ‘which market?’ problem is dealt with in an inconsistent way in the paper.
The preferred market is the one in which the entity deals most often, rather
than the most advantageous market.1 This seems to be inconsistent with the
non-entity-specific assumption of the paper. We do not accept this assumption
but we believe that, if it is to be made, it should be followed consistently.
14. With regard to entity specific assumptions, we believe that the purpose of
financial reports is to reflect the financial condition and performance of a
specific entity and should therefore reflect the specific opportunities available
to that entity. Examples of how these might affect valuation are referred to
above. We certainly do not support basing the valuation of assets on overoptimistic forecasts by management or on returns to particular advantages
enjoyed by the entity that are really separate intangible assets; these are cases
of misapplication of entity specific assumptions rather than a reason to adopt a
non-entity specific approach.
Michael Jones
Chair FARSIG
michaeljohn.jones@bristol.ac.uk
David Oldroyd
Chair FARSIG Technical Committee
david.oldroyd@ncl.ac.uk
1
The ED has changed to the most advantageous market but says that this will typically the market in
which the entity deals most often (9). Hence, the entity-specific issue remains.
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