Page 16 - Finac1 Test 2 slides - 1. Fair Value Measurement (IFRS 13)

IFRS 13

Elements of fair value measurement

Orderly transaction – Example

Solution:

• The definition (IFRS13.9) of fair value determines that the transaction used
to determine fair value should be orderly.
• An orderly transaction is defined as a transaction that assumes exposure to
the market for a period before the measurement date to allow for
marketing activities that are usual and customary for a transaction
involving such an asset or liability: it is not a forced transaction.
• The circumstances clearly indicate that the seller was in financial distress
and the transaction did not occur under normal conditions.
• Bekele would place little, if any, weight on the transaction and rather
consider the other transactions that took place during the financial year.

• The fair value per share is determined at R200 per share.

• Conclusion: The fair value of the investment in unlisted shares of Kiplagat
Ltd is (1 500 x R200) R300 000.

• Fair value hierarchy: Level 2

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