College Number(Bottom Left of College Card) | 100724676 | Year: | 3 | Course Code | MN3245 | Course Tutor: | Professor Christopher Napier1 | Assignment No.: | 1 | Degree Title: | Management with Accounting | Question No. & Title: | Fair Value Accounting Standard |

Candidate Number: 1401240

Fair Value Accounting

International Accounting Standard Board defines Fair Value and it gives a guide on how to measure it in the IFRS13 section.
Fair Value is “ 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 measure date”. (Financial Accounting Series, 2006)

In IFRS13 dictate the measurement, which is market value, meaning assets and liabilities should be adjusted to a value which reflect the actual market value. On the fair value basis, balance sheet provides timely and reliable information as compared to other measurement basis like historical cost. Similar to historical cost fair value accounting method also ignore the transaction cost and only consider the asset itself. (Financial Instrument Working Group, 2007)

According to IFRS13 fair value price is an exit price not an entry price. Exit price means the price for an assets or liability which is different from the contractually transaction price or entry price.
The main objective of fair value measurement of exit price applies to all assets regardless the company intended to use or sell the asset. (Fair Value Measurement, 2012)

The fair value is a market based measure and not an entity based measurement means in order to measure assets in fair value, companies must have used the measurement bases which are provided by third party not internally measurement. (Fair Value Measurement, 2012)

The effect of applying IFRS13 is likely to change form company to company meaning in some cases maybe