Page 28 - Finac1 Test 2 slides - 1. Fair Value Measurement (IFRS 13)

IFRS 13

Elements of fair value measurement

Debentures

• On 1 January 20.12, Serviplex issued 100 000 7% debentures of R20 each in the
open market for R1 922 000. The debentures are redeemable at par on 31
December 20.16 and the interest is payable annually in arrears. The market in
which these debentures are traded became inactive and one cannot rely on
quoted prices or on the market prices of similar instruments. On 31 December
20.13, the risk free rate was considered to be 7% and the risk premium for non-
performance was estimated to be 2%.

Foreign exchange contract

• On 1 November 20.13, Serviplex entered into a foreign exchange contract to buy
$708 000 at R7,60 on 31 January 20.14 in order to settle an existing foreign
creditor. On 31 December 20.13 the spot exchange rate was R7,70 for $1 and
foreign exchange contracts expiring on 31 January 2014 was quoted at R7,80.

REQUIRED

• Provide the fair value measurement note to the annual financial
statements of Serviplex Ltd at 31 December 20.13, in accordance with
IFRS 13.93 (a), (b) and (d).

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