Fair Value Measurement IFRS 113
Definition of Fair Value
This Ind AS 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.
Fair value is a market-based measurement, not an entity-specific measurement. For some assets and liabilities, observable market transactions, or market information might be available. For other assets and liabilities, observable market transactions and market information might not be available. However, the objective of fair value measurement in both cases is the same—to estimate the price at which an orderly transaction to sell the asset or to transfer the liability would take place between market participants at the measurement date undercurrent market conditions (ie an exit price at the measurement date from the perspective of a market participant that holds the asset or owes the liability)
When a price for an identical asset or liability is not observable, an entity measures fair value using another valuation technique that maximizes the use of relevant observable inputs and minimizes the use of unobservable inputs. Because fair value is a market-based measurement, it is measured using the assumptions that market participants would use when pricing the asset or liability, including assumptions about risk. As a result, an entity's intention to hold an asset or to settle or otherwise fulfill a liability is not relevant when measuring fair value
The definition of fair value focuses on assets and liabilities because they are the primary subject of accounting measurement. In addition, this Ind AS shall be applied to an entity's own equity instruments measured at fair value.
The measurement and disclosure requirements of this Ind AS do not apply to the following:
(a) share-based payment transactions within the scope of Ind AS 102, Share-based Payment;
(b) leasing transactions within the scope of Ind AS 17, Leases; and
(c) measurements that have some similarities to fair value but are not fair value, such as net realizable value in Ind AS 2, Inventories, or value in use in Ind AS 36, Impairment of Assets.
The disclosures required by this Ind AS are not required for the following:
(a) plan assets measured at fair value in accordance with Ind AS 19, Employee Benefits;
(b) (Refer Appendix 1); and
(c) assets for which recoverable amount is fair value less costs of disposal in accordance with Ind AS 36.
The asset or liability
Fair value measurement is for a particular asset or liability. Therefore, when measuring fair value an entity shall take into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Such characteristics include, for example, the following:
(a) the condition and location of the asset; and
(b) restrictions, if any, on the sale or use of the asset.