The International Accounting Standards Board (IASB) is seeking stakeholders’ views about their experience with IFRS 13, the accounting standard that explains how to measure the ‘fair value’ of assets and liabilities, to address problems identified with disclosure requirements
The request forms part of the board’s post-implementation review of IFRS 13 Fair Value Measurement.
The main problem identified was with disclosure reporting. 'Many users of financial statements said that disclosures about fair values were important although they found many of the disclosures provided in financial statements generic, reducing the usefulness of the information. Most preparers said that some disclosure requirements for Level 3 fair value measurements are burdensome and fail to reflect entities’ business management.'
It was questioned whether the disclosures are useful to investors. 'In particular, many preparers questioned whether disclosures are useful when they are aggregated and cover multiple assets or liabilities.'
The post-implementation review of IFRS 13 consists of two phases. In the first phase, IASB identified topics for further analysis in the second phase, which begins with the latest request for information.
In this second phase the review is focusing on disclosures about fair value measurements; further information about measuring quoted investments in subsidiaries, joint ventures and associates at fair value; application of the concept of the ‘highest and best use’ when measuring the fair value of non-financial assets; and application of judgement.
In addition, the request for information explores whether there is a need for further guidance on measuring the fair value of biological assets and unquoted equity instruments.
The objective of a post-implementation review is to assess whether an accounting standard works as intended and involves analysing how the requirements in the standard affect investors, companies and auditors. The PIR also helps detect areas of a standard that may present challenges that could result in inconsistent application of the requirements.
Hans Hoogervorst, IASB chairman, said: ‘Post-implementation reviews form an important part of our work to maintain IFRS standards, and I encourage our stakeholders to share their experience with IFRS 13.’
IFRS 13 defines fair value and sets out how fair value should be measured and which disclosures are required about fair value measurements. The standard was issued in May 2011 and became effective from 1 January 2013.
| Area to assess further during phase 2 of the IFRS 13 PIR | Objective of further assessment |
| Disclosures about fair value measurements | To gain a deeper understanding of both users’ and preparers’ perspectives on the usefulness of fair value measurement disclosures.
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| Prioritising Level 1 inputs or the unit of account. | To further assess the extent and effect of the issue as well as current practice.
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| Application of the concept of the highest and best use when measuring the fair value of non-financial assets | To better understand the challenges when applying this concept, and to assess how pervasive it is and whether further support could be helpful.
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| Application of judgement in specific areas. | To assess the challenges in applying judgements in specific areas and whether further support could be helpful.
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The deadline for submitting responses to the post-implementation review is 22 September.
The 35-page Request for Information: Post-implementation Review—IFRS 13 Fair Value Measurement is here.
