What is the basic rule related to inputs to valuation techniques stated in IFRS 13?
IFRS 13 is clear that the valuation technique your entity uses must maximize the use of relevant observable inputs and minimize the use of unobservable inputs. A change in a valuation technique can be made but only if the change results in a measurement that is equally or more representative of fair value.
How is fair value defined under IFRS 13?
IFRS 13 defines 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).
What are Level 1 inputs?
What is the definition of Level 1 inputs? Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
What terminology is used in IFRS to describe the asset group?
IFRS requires grouping by “cash generating unit” (“CGU”). A CGU is the smallest identifiable group of assets generating cash inflows that are largely independent of the cash inflows from other assets or groups of assets.
What is book value formula?
Book Value Formula Mathematically, book value is the difference between a company’s total assets and total liabilities. Book value of a company = Total assets − Total liabilities \text{Book value of a company} = \text{Total assets} – \text{Total liabilities} Book value of a company=Total assets−Total liabilities
What if book value is negative?
If book value is negative, where a company’s liabilities exceed its assets, this is known as a balance sheet insolvency. It is equal to a firm’s total assets minus its total liabilities, which is the net asset value or book value of the company as a whole.
What are Level 3 inputs?
Level 3 inputs are unobservable inputs for the asset or liability. Unobservable inputs should be used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.