Fair Value Accounting and Impairment Loss

Running head: REPORT 1
CORPORATE ACCOUNTING
STUDENT DETAILS:
6/9/2019

REPORT 2
Part-1
The fair value accounting utilizes the current market value as a base to identify some liabilities as
well as assets. The fair value is considered as projected cost at which the asset may be traded or
the liabilities settled in the arranged transactions to the 3rd person in the present conditions of
market. The meaning of fair value involves some concepts, such as orderly transaction, third
party, the present market conditions as well as intention (Wingard, Bosman and Amisi, 2016).
The best measurement of fair value is depended on the price provided in the active marketplace.
The active marketplace is a place where there is the adequately higher volume of the transaction
to render constant data related to the prices. In the following parts, the accounting of fair value
measurement is discussed and critically examined.
The marketplace from that the fair value is resulting, must be a principal marketplace for liability
and asset, as the great dealing volume connected to this marketplace must most probably lead to
a great price for a trader. A marketplace where the businesses usually sell the asset types in the
question and settle the liability is supposed to be a main marketplace (Bassemir, 2018). Further,
in the accounting related to fair value, there are various common methods allowed to derive the
fair value of asset that are Cost approach, income approach and market approach. Generally
Accepted Accounting Principles renders the pecking order of sources of data, which range from
Level one or best level to Level three or worst level. The common intention of the data’s level is
to step accountants by the sequence of the substitutes of valuation, wherever the solution nearer
to Level one are chosen above Level three.

REPORT 3
Furthermore, IFRS 13 ‘the Fair Value Measurement’ describes the fair value, sets in the separate
International financial reporting standard, the framework for assessing the fair value, as well as
needs disclosure in relation to the measurements of fair value. This standard was published in
year 2011. IFRS 13 became effective from the 1/1/2013. This standard is applicable while other
Standard allows or needs the disclosure of fair value, measurement of fair value and
measurements on the basis of fair value, like cost reduces from the fair value for selling), apart
from the particular situations where other Standards regulate. For an instance, this accounting
standard does not mention disclosure and measurement provisions to make the share-based
payment transaction, impairment of asset and lease. This accounting standard does not develop
the requirements related to disclosure for the fair value in respect of the retirement plan along
with the employee benefits (Ball, Li and Shivakumar, 2015).
Moreover, IFRS 13 describes the fair value as a price, which will be attained to sell the asset or
make payment for transferring the liability in the arranged dealing amid marketplace contributors
at the date of measurement (the present price). While assessing the fair value, the organization
utilizes the assumption that marketplace contributors will utilize while pricing the assets or the
liabilities in present market condition, involving the assumption in relation to the risks. As the
outcome, the intention of an organization to hold the assets and for settling or else fulfill the
liabilities is not applicable at the time of assessing the fair value.
Additionally, the main purpose of the fair value measurement is for estimating the prices at
which the orderly transactions for transferring the liabilities or for selling the assets will occur
among the contributors of market at date of assessment in the present market condition. In this
way, the fair value measurement needs the organization to measure the specific liability or asset,
which is a matter of a measurement (constantly with the unit of accounts), and the main (and

REPORT 4
most beneficial) marketplace for the liability or asset. It also requires to assess the valuation
techniques relevant for a measurement, regarding an accessibility of information with that to
establish the inputs for stating the assumption that marketplace contributors would utilize while
pricing the liability or asset and a level of the fair value pecking order within that the inputs are
categorized. Additionally, measurement is also required for the non-financial assets, the
valuation principle that is proper for the measurements (constantly with the higher and better
exercise)
IFRS 13 renders various guidance on the fair value’s measurement. According to these guidance,
the organization considers the features of the liabilities or assets being evaluated which the
marketplace contributors will consider at the time of pricing of liability and asset at the date of
measurement (for an example, the condition as well as place of the assets and the restriction on
the utilization and sale of the assets). Also, the measurement of fair value supposes the
transactions occurring in a key marketplace for the liabilities or assets. On the other hand, in
absence of the key marketplace, the most beneficial marketplace for the liabilities or assets.
Further, the fair value measurement supposes the methodical or arranged transactions among
marketplace contributors at a date of measurement as per the present marketplace conditions.
The liability’s fair value shows the non-performance risks (risks that company would not
conform to the obligations), involving the personal credit risk of company as well as supposing
the similar non-performance risks prior to as well as subsequent the relocation of the liabilities.
Additionally, the fair value measurement of the non-financial assets considers the high as well as
good exercise. A fair value measurement of the non-financial liabilities or financial liabilities or
the own equity instruments of corporation supposes this is shifted to the marketplace participants
at the date of measurement, without the settlements, extinguishment, and termination at a date of