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IFRS 13

Elements of fair value measurement

Market participants – Example

Scenario:

• Bekele holds 1 000 shares in Defar Ltd. Defar Ltd is a company listed on
the JSE Limited. The share price of Defar Ltd according to the JSE was
R250 per share on 30 June 20.12. Bekele determined that it is possible
to conclude an off-market transaction of R300 per Defar Ltd share.

Solution:
• An entity determines the fair value measurement with reference to the
principal market for the asset or if no principal market exists, with
reference to the most advantageous market for the asset (IFRS 13.16).

• IFRS 13 defines the principal market as the market with the greatest
volume and level of activity for the asset or liability which in this case is
the JSE.

• Even though the most advantageous market is the off-market
transaction for the listed share of R300 per share; the principal market
is the JSE, where the share price is R250 per share.
• Conclusion: The fair value of the listed investment in Defar Ltd is R250
000 (1 000 x R250).

• Fair value hierarchy: Level 1

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