What is fair value IFRS 13

Here are some basics to help you refresh yourself with GPFR in Xero

Fair value is a measurement basis.

IFRS 13 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 (i.e. an exit price).

Key terms to remember:

1. Current exit price
2. Orderly transaction
3. Market participants

Current exit price

The price that would be received to sell an asset or paid to transfer a liability.

The holder of the asset or liability enters the transaction as a price-taker.

Orderly transaction

Assumes exposure to a market before the measurement date to allow for marketing activities that are usual and customary for transactions.

Not a forced transaction.

Market participant

Buyers and sellers in the principal market for the asset or liability that have these traits:

1. They are independent, not related parties
2. They are knowledgeable, having a reasonable understanding of the asset or liability 
3. They can enter into this transaction
4. They are not forced, or compelled to, they are willing

Who cares?

Auditors.

You, our system has a fair value policy.

For you, is there a line item that fits this fair value criteria? such as property?