Fair Value Measurement: Key Concepts and Practices

This module explores the measurement methods for assets and liabilities as prescribed by the International Accounting Standards Board $($IASB$).$ According to the IASB standards, assets are typically measured using the cost or fair value approach. The cost model entails initially measuring assets at their historical cost, while the fair value model reflects the current market value of the asset. Additionally, alternative methods like net realizable value, fair value minus disposal costs, recoverable quantity, and value in use may be employed depending on the asset and relevant accounting standard.

When it comes to liabilities, financial liabilities are measured at fair value, while non$-$financial liabilities are assessed based on the best estimate of the expenditure required for settlement. By understanding these measurement techniques, accounting professionals can ensure accurate financial reporting and facilitate informed decision$-$making.

Instructions:

Answer the following questions:

What are the primary goals of IFRS $13?$

What are the most important components of the definition of "fair value"?

In what ways does the current definition of fair value differ from previous accounting standards?

What are the essential stages involved in measuring fair value?

Describe the distinction between the current use of an asset and its highest and greatest use.

Compare the in$-$combination valuation premise with the stand$-$alone valuation premise.

What is the distinction between an asset or liability's primary market and its most advantageous market?

What valuation techniques are available to assess fair value?

Explain the hierarchy of fair value.

How does the fair value of a liability differ from the valuation of an asset?