Fair value Essay Example | Topics and Well Written Essays - 2000 words

Fair value - Essay Examplevalue measurement, there is need to know the importation of sensible value which is basically exit price of a market exploit rather than specifically applicable only to an entity. Said fair value depends basically whether or not there is an vigorous market or not but preferably the exit price must be that of ready market, if there is any. Thus if there is dynamical market, the exit price would refer to quoted prices for identical assets or liabilities that a company or entity can access at measurement date. Thus if there is no active market, that which is observable or objective available should be the basis for said fair value as much as possible. However, IFRS categorizes the fair value into three (3) inputs which are arranged in hierarchy bounteous priority giving the highest priority to (adjusted) quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs as provided or in IFRS 1372 (Deloitte 2014a).When it is demand to use fair value? It is required for certain assets and liabilities as implemented in each IAS or IFRS issued by the IASB. As such, the measurement and divine revelation necessary under IFRS 13 do not apply to the following according to IFRS 13.6 (1) Share-based payment transaction within the scope of IFRS 2 Share-based Payment (2) Leasing transactions within the scoped of IAS 17 Leases (3) Measurements that appear similar to fair value but are not the same, such as the net realizable value in IAS 2 Inventories, and (4) Value n use in IAS 36- Impairment of assets (BDO, nod)When it is permitted? It is permitted as provided for certain assets and liabilities also as implemented by specific IAS or IFRS issued by IASB. In both cases however, there is a requirement of disclosure about the fair value measurement being used by the entity (Deloitte, 2014a).In so applying the categorization of inputs to measure fair value using different levels of the fair val ues