On 12 May 2011, the IASB has issued IFRS 13 Fair Value Measurement which replaces the guidance on fair value measurement in existing IFRS accounting literature with a single standard.
The IFRS is the result of joint efforts by the IASB and FASB to develop a converged fair value framework and both IASB and FASB issued substantially converged requirements for Fair Value Measurement and Disclosures; the FASB has also issued conforming amendments to their own fair value guidance in ASC 820.
IFRS 13 defines fair value, provides guidance on how to determine fair value and requires disclosures about fair value measurements. However, IFRS 13 does not change the requirements regarding which items should be measured or disclosed at fair value.
The requirements do not extend the use of fair value accounting, but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRSs or US GAAP.
For IFRSs, IFRS 13 Fair Value Measurement will improve consistency and reduce complexity by providing, for the first time, a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs.
For US GAAP, the update will supersede most of the guidance in Topic 820, although many of the changes are clarifications of existing guidance or wording changes to align with IFRS 13. It also reflects the FASB’s consideration of the different characteristics of public and non-public entities and the needs of users of their financial statements. Non-public entities will be exempt from a number of the new disclosure requirements.
IFRS 13 is effective for annual periods beginning on or after 1 January 2013 with early application permitted.
Publication issued by KPMG
This edition of First Impressions considers the requirements of IFRS 13 Fair Value Measurement issued in May 2011. This publication includes a discussion of the key elements of the fair value measurement requirements and highlights the various application issues of the standard.