Discussion on Fair Value Techniques in Financial Reporting And Management

Financial Reporting And
Management

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Valuation techniques as per IASB in respect of financial reporting and international
reporting standards.................................................................................................................1
1.2 Discussion over the reliability of using fair value techniques..........................................3
1.3 Disclosure requirements as per international reporting standards which governs the use of
Fair market value....................................................................................................................4
TASK 2 ..........................................................................................................................................6
2.1 Discuss the key definition of term used in clarifying the difference between debt and
equity under IAS 32, this should include financial assets, financial liabilities and equity
instruments.............................................................................................................................6
2.2 Discussion over the key characteristics or the criteria which are used to make
differentiation between debt and equity under IFRS IAS 32. Discussion of type of financial
instruments and how they recognised in financial statements................................................7
2.3 Discuss over the issues which recognises convoluted financial instruments present in
financial instruments..............................................................................................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Financial reporting should be in a way which can clearly show the position of firm hence
management and accountants of any firm should use some reliable measures which are scientific
and logical so that they can clearly present the data which are also reliable so that they can
manage their business operations in an efficient manner which can provide better output to the
company(Agoglia, Doupnik and Tsakumis, 2011). Report is based on the fact that whether to
adopt historical values of assets held by cited entity or to use fair market value of those assets by
the accountants of any firm(International Accounting Standards Board (IASB). 2017). To
remove the confusion to choose either of these two is clarified through the below mentioned
facts and concepts so that users can get better relevant informations in order to make any
decision regarding their investments. And this also enable the managers to ascertain the actual
financial situation of firm.
TASK 1
1.1 Valuation techniques as per IASB in respect of financial reporting and international reporting
standards
The International Accounting Standard Board (IASB) is a private institution which deals
in development and various other improvement of standards made for financial reporting i.e.
International Financial Reporting Standards. Its main work is to oversight the IFRS in order to
make the statements of finance more reliable and more credible so that healthier presentation can
be made in front of its users.
IFRS 13 Fair Value Measurement
This standard of of IFRS has been issued by international accounting standard board of
12th day of May 2011 in which the use of fair market in the valuation of assets of any enterprise
has been mentioned so that they can value them on that amount which they can get as proceeds
of such fixed as well as current assets on selling them in open market(Altamuro and Beatty,
2010). There are various other objectives which are behind issuing such standards. And these are
described below :
 Defining the fair value of any asset so that they can put that amount as their value which
they can get through selling them in open market.
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 For providing a single set of requirement for the measurement of techniques so that they
can increase the scope of exclusions of such elements which can make a unethical
fluctuation.
 To specifically describe the single set of requirements for the measurement of market
valuation.
IFRS 13 do not contain those specific criteria in which it has been mentioned that when
such assets of any entity should be valued of market value. As these criteria are described in
some other standards.
On the other hand there are some particular IFRS which specify some assets which
should valued only at fair market value(Armstrong, Guay and Weber, 2010). Which can be
measured on each reporting date, means that they should value such assets on each date so that
they can get the amount of asset on which they can get as sale proceed on selling them on same
date. In some other cases such as alteration in assets it can be possible that these are quantify on
recurring basis.
The above mentioned standard can be applied on the assets which meets the specific
criteria which have been mentioned there in other standards as well as to those assets in which
some assets are specifically described. IFRS 13 can be applied on both financial and non
financial data which are there in transaction of any company but these are guided through limited
scope exclusion(Barth and Landsman, 2010). This provides guidance which is purely based on
principle which are scientifically approved and universally accepted as through following these
principle based guidance of IFRS 13 an entity can easily and effectively quantify its available
possessions. It does not attempt to exclude any judgement which is their in valuation as every
enterprise can adopt their different and realistic methods of valuation. Rather than this it
mention the framework through which it can remove the inconsistency which is their in
quantifying the possessions of entity. It can also enhance the comparison capability during fairly
quantification measurements(Bédard and Gendron, 2010). Standard remains effective during the
whole financial year so that their can be consistency in measurement as early adoption of such
methods will continue till end.
Valuation Techniques
Scope exclusions : There are certain scope exclusions are mentioned there in IFRS 13,
which are mentioned as under :
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