29.12.2012 |
EN |
Official Journal of the European Union |
L 360/78 |
COMMISSION REGULATION (EU) No 1255/2012
of 11 December 2012
amending Regulation (EC) No 1126/2008 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council as regards International Accounting Standard 12, International Financial Reporting Standards 1 and 13, and Interpretation 20 of the International Financial Reporting Interpretations Committee
(Text with EEA relevance)
THE EUROPEAN COMMISSION,
Having regard to the Treaty on the Functioning of the European Union,
Having regard to Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the application of international accounting standards (1), and in particular Article 3(1) thereof,
Whereas:
(1) |
By Commission Regulation (EC) No 1126/2008 (2) certain international standards and interpretations that were in existence at 15 October 2008 were adopted. |
(2) |
On 20 December 2010, the International Accounting Standards Board (IASB) published amendments to International Financial Reporting Standard (‧IFRS‧) 1 First-time Adoption of International Financial Reporting Standards - Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters (hereinafter "the amendments to IFRS 1") and to International Accounting Standard (‧IAS‧) 12 Income Taxes - Deferred Tax: Recovery of Underlying Assets (hereinafter "the amendments to IAS 12"). The objective of the amendments to IFRS 1 is to introduce a new exemption in the scope of IFRS 1 – namely, entities that have been subject to severe hyperinflation are allowed to use fair value as the deemed cost of their assets and liabilities in their opening IFRS statement of financial position. In addition, those amendments also replace the references to fixed dates in IFRS 1 with references to the date of transition. As to IAS 12, it prescribes the accounting treatment for income taxes. The objective of the amendments to IAS 12 is to introduce an exception to the measurement principle in IAS 12 in the form of a rebuttable presumption that assumes that the carrying amount of an investment property measured at fair value would be recovered through sale and an entity would be required to use the tax rate applicable to the sale of underlying asset. |
(3) |
On 12 May 2011, the IASB issued IFRS 13 Fair Value Measurement (hereinafter "IFRS 13"). IFRS 13 sets out a single IFRS framework for measuring fair value and provides comprehensive guidance on how to measure the fair value of both financial and non-financial assets and liabilities. IFRS 13 applies when another IFRS requires or permits fair value measurement or disclosures about fair value measurements. |
(4) |
On 19 October 2011, the IASB issued Interpretation 20 of the International Financial Reporting Interpretations Committee (‧IFRIC") Stripping Costs in the Production Phase of a Surface Mine ("IFRIC 20"). The objective of IFRIC 20 is to provide guidance on recognition of production stripping costs as an asset and on the initial and subsequent measurement of the stripping activity asset in order to reduce the diversity in practice as to how entities account for stripping costs incurred in the production phase of a surface mine. |
(5) |
This Regulation endorses the amendments to IAS 12, the amendments to IFRS 1, IFRS 13, IFRIC 20, and the resulting amendments to other standards and interpretations. Those standards, amendments to existing standards or interpretations contain some references to IFRS 9 that at present cannot be applied as IFRS 9 has not been adopted by the Union yet. Therefore, any reference to IFRS 9 as laid down in the Annex to this Regulation should be read as a reference to IAS 39 Financial Instruments: Recognition and Measurement. Additionally, any consequential amendment to IFRS 9 resulting from the Annex to this Regulation cannot be applied. |
(6) |
The consultation with the Technical Expert Group (TEG) of the European Financial Reporting Advisory Group (EFRAG) confirms that the amendments to IAS 12 and the amendments to IFRS 1 as well as IFRS 13 and IFRIC 20 meet the technical criteria for adoption set out in Article 3(2) of Regulation (EC) No 1606/2002. |
(7) |
Regulation (EC) No 1126/2008 should therefore be amended accordingly. |
(8) |
The measures provided for in this Regulation are in accordance with the opinion of the Accounting Regulatory Committee, |
HAS ADOPTED THIS REGULATION:
Article 1
1. The Annex to Regulation (EC) No 1126/2008 is amended as follows:
(a) |
International Accounting Standard (IAS) 12 Income Taxes is amended as set out in the Annex to this Regulation; |
(b) |
Interpretation 21 of the Standing Interpretations Committee (SIC) is deleted in accordance with the amendments to IAS 12 as set out in the Annex to this Regulation. |
(c) |
International Financial Reporting Standard (IFRS) 1 First-time Adoption of International Financial Reporting Standards is amended as set out in the Annex to this Regulation; |
(d) |
IFRS 13 Fair Value Measurement is inserted as set out in the Annex to this Regulation; |
(e) |
IFRS 1, IFRS 2, IFRS 3, IFRS 4, IFRS 5, IFRS 7, IAS 1, IAS 2, IAS 8, IAS 10, IAS 16, IAS 17, IAS 18, IAS 19, IAS 20, IAS 21, IAS 28, IAS 31, IAS 32, IAS 33, IAS 34, IAS 36, IAS 38, IAS 39, IAS 40, IAS 41, IFRIC 2, IFRIC 4, IFRIC 13, IFRIC 17 and IFRIC 19 are amended in accordance with IFRS 13 as set out in the Annex to this Regulation; |
(f) |
IFRIC Interpretation 20 Stripping Costs in the Production Phase of a Surface Mine is inserted as set out in the Annex to this Regulation; |
(g) |
IFRS 1 is amended in accordance with IFRIC 20 as set out in the Annex to this Regulation. |
2. Any reference to IFRS 9 as laid down in the Annex to this Regulation shall be read as a reference to IAS 39 Financial Instruments: Recognition and Measurement.
3. Any consequential amendment to IFRS 9 resulting from the Annex to this Regulation shall not be applied.
Article 2
1. Each company shall apply the amendments referred to in points (a), (b) and (c) of Article 1(1) at the latest, as from the commencement date of its first financial year starting on or after the date of entry into force of this Regulation.
2. Each company shall apply IFRS 13, IFRIC 20, and the consequential amendments as referred to in points (d) – (g) of Article 1(1), at the latest, as from the commencement date of its first financial year starting on or after 1 January 2013.
Article 3
This Regulation shall enter into force on the third day following that of its publication in the Official Journal of the European Union.
This Regulation shall be binding in its entirety and directly applicable in all Member States.
Done at Brussels, 11 December 2012.
For the Commission
The President
José Manuel BARROSO
(1) OJ L 243, 11.9.2002, p. 1.
(2) OJ L 320, 29.11.2008, p. 1.
ANNEX
INTERNATIONAL ACCOUNTING STANDARDS
IFRS 1 |
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IAS 12 |
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IFRS 13 |
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IFRIC 20 |
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"Reproduction allowed within the European Economic Area. All existing rights reserved outside the EEA, with the exception of the right to reproduce for the purposes of personal use or other fair dealing. Further information can be obtained from the IASB at www.iasb.org"
AMENDMENTS TO IFRS 1
First-time Adoption of International Financial Reporting Standards
After paragraph 31B a heading and paragraph 31C are added.
PRESENTATION AND DISCLOSURE
Explanation of transition to IFRSs
Use of deemed cost after severe hyperinflation
31C |
If an entity elects to measure assets and liabilities at fair value and to use that fair value as the deemed cost in its opening IFRS statement of financial position because of severe hyperinflation (see paragraphs D26–D30), the entity’s first IFRS financial statements shall disclose an explanation of how, and why, the entity had, and then ceased to have, a functional currency that has both of the following characteristics:
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Appendix B
Exceptions to the retrospective application of other IFRSs
Paragraph B2 is amended.
Derecognition of financial assets and financial liabilities
B2 |
Except as permitted by paragraph B3, a first-time adopter shall apply the derecognition requirements in IAS 39 Financial Instruments: Recognition and Measurement prospectively for transactions occurring on or after the date of transition to IFRSs. For example, if a first-time adopter derecognised non-derivative financial assets or non-derivative financial liabilities in accordance with its previous GAAP as a result of a transaction that occurred before the date of transition to IFRSs, it shall not recognise those assets and liabilities in accordance with IFRSs (unless they qualify for recognition as a result of a later transaction or event). |
Appendix D
Exemptions from other IFRSs
Paragraphs D1 and D20 are amended.
D1 |
An entity may elect to use one or more of the following exemptions:
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An entity shall not apply these exemptions by analogy to other items.
Fair value measurement of financial assets or financial liabilities at initial recognition
D20 |
Notwithstanding the requirements of paragraphs 7 and 9, an entity may apply the requirements in the last sentence of IAS 39 paragraph AG76 and in paragraph AG76A prospectively to transactions entered into on or after the date of transition to IFRSs. |
A heading and paragraphs D26–D30 are added.
Severe hyperinflation
D26 |
If an entity has a functional currency that was, or is, the currency of a hyperinflationary economy, it shall determine whether it was subject to severe hyperinflation before the date of transition to IFRSs. This applies to entities that are adopting IFRSs for the first time, as well as entities that have previously applied IFRSs. |
D27 |
The currency of a hyperinflationary economy is subject to severe hyperinflation if it has both of the following characteristics:
|
D28 |
The functional currency of an entity ceases to be subject to severe hyperinflation on the functional currency normalisation date. That is the date when the functional currency no longer has either, or both, of the characteristics in paragraph D27, or when there is a change in the entity’s functional currency to a currency that is not subject to severe hyperinflation. |
D29 |
When an entity’s date of transition to IFRSs is on, or after, the functional currency normalisation date, the entity may elect to measure all assets and liabilities held before the functional currency normalisation date at fair value on the date of transition to IFRSs. The entity may use that fair value as the deemed cost of those assets and liabilities in the opening IFRS statement of financial position. |
D30 |
When the functional currency normalisation date falls within a 12-month comparative period, the comparative period may be less than 12 months, provided that a complete set of financial statements (as required by paragraph 10 of IAS 1) is provided for that shorter period. |
EFFECTIVE DATE
Paragraph 39H is added.
39H |
Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters (Amendments to IFRS 1), issued in December 2010, amended paragraphs B2, D1 and D20 and added paragraphs 31C and D26–D30. An entity shall apply those amendments for annual periods beginning on or after 1 July 2011. Earlier application is permitted. |
AMENDMENTS TO IFRS 9
IFRS 9 Financial Instruments (issued November 2009)
Paragraph C2 is amended as follows.
C2 |
In Appendix B, paragraphs B1, B2 and B5 are amended, …
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Paragraph C3 is amended by adding paragraph D20 as follows.
C3 |
In Appendix D (exemptions from other IFRSs), paragraphs D19 and D20 are amended …
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IFRS 9 Financial Instruments (issued October 2010)
Paragraphs C2 and C3 are amended as follows.
In paragraph C2, the amendment to paragraph B2 is amended as follows
B2 |
Except as permitted by paragraph B3, a first-time adopter shall apply the derecognition requirements in IFRS 9 Financial Instruments prospectively for transactions occurring on or after date of transition to IFRSs. For example, if a first-time adopter derecognised non-derivative financial assets or non-derivative financial liabilities in accordance with its previous GAAP as a result of a transaction that occurred before the date of transition to IFRSs, it shall not recognise those assets and liabilities in accordance with IFRSs (unless they qualify for recognition as a result of a later transaction or event). |
In paragraph C3, the amendment to paragraph D20 is amended as follows:
D20 |
Despite the requirements of paragraphs 7 and 9, an entity may apply the requirements in the last sentence of paragraph B5.4.8 and in paragraph B5.4.9 of IFRS 9 prospectively to transactions entered into on or after the date of transition to IFRSs. |
Amendments to IAS 12
Income Taxes
Paragraph 52 is renumbered as paragraph 51A. Paragraph 10 and the examples following paragraph 51A are amended. Paragraphs 51B and 51C and the following example, and paragraphs 51D, 51E, 98 and 99 are added.
DEFINITIONS
Tax base
10 |
Where the tax base of an asset or liability is not immediately apparent, it is helpful to consider the fundamental principle upon which this Standard is based: that an entity shall, with certain limited exceptions, recognise a deferred tax liability (asset) whenever recovery or settlement of the carrying amount of an asset or liability would make future tax payments larger (smaller) than they would be if such recovery or settlement were to have no tax consequences. Example C following paragraph 51A illustrates circumstances when it may be helpful to consider this fundamental principle, for example, when the tax base of an asset or liability depends on the expected manner of recovery or settlement. |
MEASUREMENT
51A |
In some jurisdictions, the manner in which an entity recovers (settles) the carrying amount of an asset (liability) may affect either or both of:
In such cases, an entity measures deferred tax liabilities and deferred tax assets using the tax rate and the tax base that are consistent with the expected manner of recovery or settlement. |
Example A
An item of property, plant and equipment has a carrying amount of 100 and a tax base of 60. A tax rate of 20 % would apply if the item were sold and a tax rate of 30 % would apply to other income.
The entity recognises a deferred tax liability of 8 (40 at 20 %) if it expects to sell the item without further use and a deferred tax liability of 12 (40 at 30 %) if it expects to retain the item and recover its carrying amount through use.
Example B
An item of property, plant and equipment with a cost of 100 and a carrying amount of 80 is revalued to 150. No equivalent adjustment is made for tax purposes. Cumulative depreciation for tax purposes is 30 and the tax rate is 30 %. If the item is sold for more than cost, the cumulative tax depreciation of 30 will be included in taxable income but sale proceeds in excess of cost will not be taxable.
The tax base of the item is 70 and there is a taxable temporary difference of 80. If the entity expects to recover the carrying amount by using the item, it must generate taxable income of 150, but will only be able to deduct depreciation of 70. On this basis, there is a deferred tax liability of 24 (80 at 30 %). If the entity expects to recover the carrying amount by selling the item immediately for proceeds of 150, the deferred tax liability is computed as follows:
|
Taxable Temporary Difference |
Tax Rate |
Deferred Tax Liability |
Cumulative tax depreciation |
30 |
30 % |
9 |
Proceeds in excess of cost |
50 |
nil |
— |
Total |
80 |
|
9 |
(note: in accordance with paragraph 61A, the additional deferred tax that arises on the revaluation is recognised in other comprehensive income)
Example C
The facts are as in example B, except that if the item is sold for more than cost, the cumulative tax depreciation will be included in taxable income (taxed at 30 %) and the sale proceeds will be taxed at 40 %, after deducting an inflation-adjusted cost of 110.
If the entity expects to recover the carrying amount by using the item, it must generate taxable income of 150, but will only be able to deduct depreciation of 70. On this basis, the tax base is 70, there is a taxable temporary difference of 80 and there is a deferred tax liability of 24 (80 at 30 %), as in example B.
If the entity expects to recover the carrying amount by selling the item immediately for proceeds of 150, the entity will be able to deduct the indexed cost of 110. The net proceeds of 40 will be taxed at 40 %. In addition, the cumulative tax depreciation of 30 will be included in taxable income and taxed at 30 %. On this basis, the tax base is 80 (110 less 30), there is a taxable temporary difference of 70 and there is a deferred tax liability of 25 (40 at 40 % plus 30 at 30 %). If the tax base is not immediately apparent in this example, it may be helpful to consider the fundamental principle set out in paragraph 10.
(note: in accordance with paragraph 61A, the additional deferred tax that arises on the revaluation is recognised in other comprehensive income)
51B |
If a deferred tax liability or deferred tax asset arises from a non-depreciable asset measured using the revaluation model in IAS 16, the measurement of the deferred tax liability or deferred tax asset shall reflect the tax consequences of recovering the carrying amount of the non-depreciable asset through sale, regardless of the basis of measuring the carrying amount of that asset. Accordingly, if the tax law specifies a tax rate applicable to the taxable amount derived from the sale of an asset that differs from the tax rate applicable to the taxable amount derived from using an asset, the former rate is applied in measuring the deferred tax liability or asset related to a non-depreciable asset. |
51C |
If a deferred tax liability or asset arises from investment property that is measured using the fair value model in IAS 40, there is a rebuttable presumption that the carrying amount of the investment property will be recovered through sale. Accordingly, unless the presumption is rebutted, the measurement of the deferred tax liability or deferred tax asset shall reflect the tax consequences of recovering the carrying amount of the investment property entirely through sale. This presumption is rebutted if the investment property is depreciable and is held within a business model whose objective is to consume substantially all of the economic benefits embodied in the investment property over time, rather than through sale. If the presumption is rebutted, the requirements of paragraphs 51 and 51A shall be followed. |
Example illustrating paragraph 51C
An investment property has a cost of 100 and fair value of 150. It is measured using the fair value model in IAS 40. It comprises land with a cost of 40 and fair value of 60 and a building with a cost of 60 and fair value of 90. The land has an unlimited useful life.
Cumulative depreciation of the building for tax purposes is 30. Unrealised changes in the fair value of the investment property do not affect taxable profit. If the investment property is sold for more than cost, the reversal of the cumulative tax depreciation of 30 will be included in taxable profit and taxed at an ordinary tax rate of 30 %. For sales proceeds in excess of cost, tax law specifies tax rates of 25 % for assets held for less than two years and 20 % for assets held for two years or more.
Because the investment property is measured using the fair value model in IAS 40, there is a rebuttable presumption that the entity will recover the carrying amount of the investment property entirely through sale. If that presumption is not rebutted, the deferred tax reflects the tax consequences of recovering the carrying amount entirely through sale, even if the entity expects to earn rental income from the property before sale.
The tax base of the land if it is sold is 40 and there is a taxable temporary difference of 20 (60 – 40). The tax base of the building if it is sold is 30 (60 – 30) and there is a taxable temporary difference of 60 (90 – 30). As a result, the total taxable temporary difference relating to the investment property is 80 (20 + 60).
In accordance with paragraph 47, the tax rate is the rate expected to apply to the period when the investment property is realised. Thus, the resulting deferred tax liability is computed as follows, if the entity expects to sell the property after holding it for more than two years:
|
Taxable Temporary Difference |
Tax Rate |
Deferred Tax Liability |
Cumulative tax depreciation |
30 |
30 % |
9 |
Proceeds in excess of cost |
50 |
20 % |
10 |
Total |
80 |
|
19 |
If the entity expects to sell the property after holding it for less than two years, the above computation would be amended to apply a tax rate of 25 %, rather than 20 %, to the proceeds in excess of cost.
If, instead, the entity holds the building within a business model whose objective is to consume substantially all of the economic benefits embodied in the building over time, rather than through sale, this presumption would be rebutted for the building. However, the land is not depreciable. Therefore the presumption of recovery through sale would not be rebutted for the land. It follows that the deferred tax liability would reflect the tax consequences of recovering the carrying amount of the building through use and the carrying amount of the land through sale.
The tax base of the building if it is used is 30 (60 – 30) and there is a taxable temporary difference of 60 (90 – 30), resulting in a deferred tax liability of 18 (60 at 30 %).
The tax base of the land if it is sold is 40 and there is a taxable temporary difference of 20 (60 – 40), resulting in a deferred tax liability of 4 (20 at 20 %).
As a result, if the presumption of recovery through sale is rebutted for the building, the deferred tax liability relating to the investment property is 22 (18 + 4).
51D |
The rebuttable presumption in paragraph 51C also applies when a deferred tax liability or a deferred tax asset arises from measuring investment property in a business combination if the entity will use the fair value model when subsequently measuring that investment property. |
51E |
Paragraphs 51B–51D do not change the requirements to apply the principles in paragraphs 24–33 (deductible temporary differences) and paragraphs 34–36 (unused tax losses and unused tax credits) of this Standard when recognising and measuring deferred tax assets. |
EFFECTIVE DATE
98 |
Paragraph 52 was renumbered as 51A, paragraph 10 and the examples following paragraph 51A were amended, and paragraphs 51B and 51C and the following example and paragraphs 51D, 51E and 99 were added by Deferred Tax: Recovery of Underlying Assets, issued in December 2010. An entity shall apply those amendments for annual periods beginning on or after 1 January 2012. Earlier application is permitted. If an entity applies the amendments for an earlier period, it shall disclose that fact. |
WITHDRAWAL OF SIC-21
99 |
The amendments made by Deferred Tax: Recovery of Underlying Assets, issued in December 2010, supersede SIC Interpretation 21 Income Taxes—Recovery of Revalued Non-Depreciable Assets. |
INTERNATIONAL FINANCIAL REPORTING STANDARD 13
Fair Value Measurement
OBJECTIVE
1 |
This IFRS:
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2 |
Fair value is a market-based measurement, not an entity-specific measurement. For some assets and liabilities, observable market transactions or market information might be available. For other assets and liabilities, observable market transactions and market information might not be available. However, the objective of a fair value measurement in both cases is the same—to estimate the price at which an orderly transaction to sell the asset or to transfer the liability would take place between market participants at the measurement date under current market conditions (ie an exit price at the measurement date from the perspective of a market participant that holds the asset or owes the liability). |
3 |
When a price for an identical asset or liability is not observable, an entity measures fair value using another valuation technique that maximises the use of relevant observable inputs and minimises the use of unobservable inputs. Because fair value is a market-based measurement, it is measured using the assumptions that market participants would use when pricing the asset or liability, including assumptions about risk. As a result, an entity’s intention to hold an asset or to settle or otherwise fulfil a liability is not relevant when measuring fair value. |
4 |
The definition of fair value focuses on assets and liabilities because they are a primary subject of accounting measurement. In addition, this IFRS shall be applied to an entity’s own equity instruments measured at fair value. |
SCOPE
5 |
This IFRS applies when another IFRS requires or permits fair value measurements or disclosures about fair value measurements (and measurements, such as fair value less costs to sell, based on fair value or disclosures about those measurements), except as specified in paragraphs 6 and 7. |
6 |
The measurement and disclosure requirements of this IFRS do not apply to the following:
|
7 |
The disclosures required by this IFRS are not required for the following:
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8 |
The fair value measurement framework described in this IFRS applies to both initial and subsequent measurement if fair value is required or permitted by other IFRSs. |
MEASUREMENT
Definition of fair value
9 |
This IFRS 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. |
10 |
Paragraph B2 describes the overall fair value measurement approach. |
The asset or liability
11 |
A fair value measurement is for a particular asset or liability. Therefore, when measuring fair value an entity shall take into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Such characteristics include, for example, the following:
|
12 |
The effect on the measurement arising from a particular characteristic will differ depending on how that characteristic would be taken into account by market participants. |
13 |
The asset or liability measured at fair value might be either of the following:
|
14 |
Whether the asset or liability is a stand-alone asset or liability, a group of assets, a group of liabilities or a group of assets and liabilities for recognition or disclosure purposes depends on its unit of account. The unit of account for the asset or liability shall be determined in accordance with the IFRS that requires or permits the fair value measurement, except as provided in this IFRS. |
The transaction
15 |
A fair value measurement assumes that the asset or liability is exchanged in an orderly transaction between market participants to sell the asset or transfer the liability at the measurement date under current market conditions. |
16 |
A fair value measurement assumes that the transaction to sell the asset or transfer the liability takes place either:
|
17 |
An entity need not undertake an exhaustive search of all possible markets to identify the principal market or, in the absence of a principal market, the most advantageous market, but it shall take into account all information that is reasonably available. In the absence of evidence to the contrary, the market in which the entity would normally enter into a transaction to sell the asset or to transfer the liability is presumed to be the principal market or, in the absence of a principal market, the most advantageous market. |
18 |
If there is a principal market for the asset or liability, the fair value measurement shall represent the price in that market (whether that price is directly observable or estimated using another valuation technique), even if the price in a different market is potentially more advantageous at the measurement date. |
19 |
The entity must have access to the principal (or most advantageous) market at the measurement date. Because different entities (and businesses within those entities) with different activities may have access to different markets, the principal (or most advantageous) market for the same asset or liability might be different for different entities (and businesses within those entities). Therefore, the principal (or most advantageous) market (and thus, market participants) shall be considered from the perspective of the entity, thereby allowing for differences between and among entities with different activities. |
20 |
Although an entity must be able to access the market, the entity does not need to be able to sell the particular asset or transfer the particular liability on the measurement date to be able to measure fair value on the basis of the price in that market. |
21 |
Even when there is no observable market to provide pricing information about the sale of an asset or the transfer of a liability at the measurement date, a fair value measurement shall assume that a transaction takes place at that date, considered from the perspective of a market participant that holds the asset or owes the liability. That assumed transaction establishes a basis for estimating the price to sell the asset or to transfer the liability. |
Market participants
22 |
An entity shall measure the fair value of an asset or a liability using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. |
23 |
In developing those assumptions, an entity need not identify specific market participants. Rather, the entity shall identify characteristics that distinguish market participants generally, considering factors specific to all the following:
|
The price
24 |
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions (ie an exit price) regardless of whether that price is directly observable or estimated using another valuation technique. |
25 |
The price in the principal (or most advantageous) market used to measure the fair value of the asset or liability shall not be adjusted for transaction costs. Transaction costs shall be accounted for in accordance with other IFRSs. Transaction costs are not a characteristic of an asset or a liability; rather, they are specific to a transaction and will differ depending on how an entity enters into a transaction for the asset or liability. |
26 |
Transaction costs do not include transport costs. If location is a characteristic of the asset (as might be the case, for example, for a commodity), the price in the principal (or most advantageous) market shall be adjusted for the costs, if any, that would be incurred to transport the asset from its current location to that market. |
Application to non-financial assets
Highest and best use for non-financial assets
27 |
A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. |
28 |
The highest and best use of a non-financial asset takes into account the use of the asset that is physically possible, legally permissible and financially feasible, as follows:
|
29 |
Highest and best use is determined from the perspective of market participants, even if the entity intends a different use. However, an entity’s current use of a non-financial asset is presumed to be its highest and best use unless market or other factors suggest that a different use by market participants would maximise the value of the asset. |
30 |
To protect its competitive position, or for other reasons, an entity may intend not to use an acquired non-financial asset actively or it may intend not to use the asset according to its highest and best use. For example, that might be the case for an acquired intangible asset that the entity plans to use defensively by preventing others from using it. Nevertheless, the entity shall measure the fair value of a non-financial asset assuming its highest and best use by market participants. |
Valuation premise for non-financial assets
31 |
The highest and best use of a non-financial asset establishes the valuation premise used to measure the fair value of the asset, as follows:
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32 |
The fair value measurement of a non-financial asset assumes that the asset is sold consistently with the unit of account specified in other IFRSs (which may be an individual asset). That is the case even when that fair value measurement assumes that the highest and best use of the asset is to use it in combination with other assets or with other assets and liabilities because a fair value measurement assumes that the market participant already holds the complementary assets and the associated liabilities. |
33 |
Paragraph B3 describes the application of the valuation premise concept for non-financial assets. |
Application to liabilities and an entity’s own equity instruments
General principles
34 |
A fair value measurement assumes that a financial or non-financial liability or an entity’s own equity instrument (eg equity interests issued as consideration in a business combination) is transferred to a market participant at the measurement date. The transfer of a liability or an entity’s own equity instrument assumes the following:
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35 |
Even when there is no observable market to provide pricing information about the transfer of a liability or an entity’s own equity instrument (eg because contractual or other legal restrictions prevent the transfer of such items), there might be an observable market for such items if they are held by other parties as assets (eg a corporate bond or a call option on an entity’s shares). |
36 |
In all cases, an entity shall maximise the use of relevant observable inputs and minimise the use of unobservable inputs to meet the objective of a fair value measurement, which is to estimate the price at which an orderly transaction to transfer the liability or equity instrument would take place between market participants at the measurement date under current market conditions. |
Liabilities and equity instruments held by other parties as assets
37 |
When a quoted price for the transfer of an identical or a similar liability or entity’s own equity instrument is not available and the identical item is held by another party as an asset, an entity shall measure the fair value of the liability or equity instrument from the perspective of a market participant that holds the identical item as an asset at the measurement date. |
38 |
In such cases, an entity shall measure the fair value of the liability or equity instrument as follows:
|
39 |
An entity shall adjust the quoted price of a liability or an entity’s own equity instrument held by another party as an asset only if there are factors specific to the asset that are not applicable to the fair value measurement of the liability or equity instrument. An entity shall ensure that the price of the asset does not reflect the effect of a restriction preventing the sale of that asset. Some factors that may indicate that the quoted price of the asset should be adjusted include the following:
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Liabilities and equity instruments not held by other parties as assets
40 |
When a quoted price for the transfer of an identical or a similar liability or entity’s own equity instrument is not available and the identical item is not held by another party as an asset, an entity shall measure the fair value of the liability or equity instrument using a valuation technique from the perspective of a market participant that owes the liability or has issued the claim on equity. |
41 |
For example, when applying a present value technique an entity might take into account either of the following:
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Non-performance risk
42 |
The fair value of a liability reflects the effect of non-performance risk. Non-performance risk includes, but may not be limited to, an entity’s own credit risk (as defined in IFRS 7 Financial Instruments: Disclosures). Non-performance risk is assumed to be the same before and after the transfer of the liability. |
43 |
When measuring the fair value of a liability, an entity shall take into account the effect of its credit risk (credit standing) and any other factors that might influence the likelihood that the obligation will or will not be fulfilled. That effect may differ depending on the liability, for example:
|
44 |
The fair value of a liability reflects the effect of non-performance risk on the basis of its unit of account. The issuer of a liability issued with an inseparable third-party credit enhancement that is accounted for separately from the liability shall not include the effect of the credit enhancement (eg a third-party guarantee of debt) in the fair value measurement of the liability. If the credit enhancement is accounted for separately from the liability, the issuer would take into account its own credit standing and not that of the third party guarantor when measuring the fair value of the liability. |
Restriction preventing the transfer of a liability or an entity’s own equity instrument
45 |
When measuring the fair value of a liability or an entity’s own equity instrument, an entity shall not include a separate input or an adjustment to other inputs relating to the existence of a restriction that prevents the transfer of the item. The effect of a restriction that prevents the transfer of a liability or an entity’s own equity instrument is either implicitly or explicitly included in the other inputs to the fair value measurement. |
46 |
For example, at the transaction date, both the creditor and the obligor accepted the transaction price for the liability with full knowledge that the obligation includes a restriction that prevents its transfer. As a result of the restriction being included in the transaction price, a separate input or an adjustment to an existing input is not required at the transaction date to reflect the effect of the restriction on transfer. Similarly, a separate input or an adjustment to an existing input is not required at subsequent measurement dates to reflect the effect of the restriction on transfer. |
Financial liability with a demand feature
47 |
The fair value of a financial liability with a demand feature (eg a demand deposit) is not less than the amount payable on demand, discounted from the first date that the amount could be required to be paid. |
Application to financial assets and financial liabilities with offsetting positions in market risks or counterparty credit risk
48 |
An entity that holds a group of financial assets and financial liabilities is exposed to market risks (as defined in IFRS 7) and to the credit risk (as defined in IFRS 7) of each of the counterparties. If the entity manages that group of financial assets and financial liabilities on the basis of its net exposure to either market risks or credit risk, the entity is permitted to apply an exception to this IFRS for measuring fair value. That exception permits an entity to measure the fair value of a group of financial assets and financial liabilities on the basis of the price that would be received to sell a net long position (ie an asset) for a particular risk exposure or to transfer a net short position (ie a liability) for a particular risk exposure in an orderly transaction between market participants at the measurement date under current market conditions. Accordingly, an entity shall measure the fair value of the group of financial assets and financial liabilities consistently with how market participants would price the net risk exposure at the measurement date. |
49 |
An entity is permitted to use the exception in paragraph 48 only if the entity does all the following:
|
50 |
The exception in paragraph 48 does not pertain to financial statement presentation. In some cases the basis for the presentation of financial instruments in the statement of financial position differs from the basis for the measurement of financial instruments, for example, if an IFRS does not require or permit financial instruments to be presented on a net basis. In such cases an entity may need to allocate the portfolio-level adjustments (see paragraphs 53–56) to the individual assets or liabilities that make up the group of financial assets and financial liabilities managed on the basis of the entity’s net risk exposure. An entity shall perform such allocations on a reasonable and consistent basis using a methodology appropriate in the circumstances. |
51 |
An entity shall make an accounting policy decision in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors to use the exception in paragraph 48. An entity that uses the exception shall apply that accounting policy, including its policy for allocating bid-ask adjustments (see paragraphs 53–55) and credit adjustments (see paragraph 56), if applicable, consistently from period to period for a particular portfolio. |
52 |
The exception in paragraph 48 applies only to financial assets and financial liabilities within the scope of IAS 39 Financial Instruments: Recognition and Measurement or IFRS 9 Financial Instruments. |
Exposure to market risks
53 |
When using the exception in paragraph 48 to measure the fair value of a group of financial assets and financial liabilities managed on the basis of the entity’s net exposure to a particular market risk (or risks), the entity shall apply the price within the bid-ask spread that is most representative of fair value in the circumstances to the entity’s net exposure to those market risks (see paragraphs 70 and 71). |
54 |
When using the exception in paragraph 48, an entity shall ensure that the market risk (or risks) to which the entity is exposed within that group of financial assets and financial liabilities is substantially the same. For example, an entity would not combine the interest rate risk associated with a financial asset with the commodity price risk associated with a financial liability because doing so would not mitigate the entity’s exposure to interest rate risk or commodity price risk. When using the exception in paragraph 48, any basis risk resulting from the market risk parameters not being identical shall be taken into account in the fair value measurement of the financial assets and financial liabilities within the group. |
55 |
Similarly, the duration of the entity’s exposure to a particular market risk (or risks) arising from the financial assets and financial liabilities shall be substantially the same. For example, an entity that uses a 12-month futures contract against the cash flows associated with 12 months’ worth of interest rate risk exposure on a five-year financial instrument within a group made up of only those financial assets and financial liabilities measures the fair value of the exposure to 12-month interest rate risk on a net basis and the remaining interest rate risk exposure (ie years 2–5) on a gross basis. |
Exposure to the credit risk of a particular counterparty
56 |
When using the exception in paragraph 48 to measure the fair value of a group of financial assets and financial liabilities entered into with a particular counterparty, the entity shall include the effect of the entity’s net exposure to the credit risk of that counterparty or the counterparty’s net exposure to the credit risk of the entity in the fair value measurement when market participants would take into account any existing arrangements that mitigate credit risk exposure in the event of default (eg a master netting agreement with the counterparty or an agreement that requires the exchange of collateral on the basis of each party’s net exposure to the credit risk of the other party). The fair value measurement shall reflect market participants’ expectations about the likelihood that such an arrangement would be legally enforceable in the event of default. |
Fair value at initial recognition
57 |
When an asset is acquired or a liability is assumed in an exchange transaction for that asset or liability, the transaction price is the price paid to acquire the asset or received to assume the liability (an entry price). In contrast, the fair value of the asset or liability is the price that would be received to sell the asset or paid to transfer the liability (an exit price). Entities do not necessarily sell assets at the prices paid to acquire them. Similarly, entities do not necessarily transfer liabilities at the prices received to assume them. |
58 |
In many cases the transaction price will equal the fair value (eg that might be the case when on the transaction date the transaction to buy an asset takes place in the market in which the asset would be sold). |
59 |
When determining whether fair value at initial recognition equals the transaction price, an entity shall take into account factors specific to the transaction and to the asset or liability. Paragraph B4 describes situations in which the transaction price might not represent the fair value of an asset or a liability at initial recognition. |
60 |
If another IFRS requires or permits an entity to measure an asset or a liability initially at fair value and the transaction price differs from fair value, the entity shall recognise the resulting gain or loss in profit or loss unless that IFRS specifies otherwise. |
Valuation techniques
61 |
An entity shall use valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. |
62 |
The objective of using a valuation technique is to estimate the price at which an orderly transaction to sell the asset or to transfer the liability would take place between market participants at the measurement date under current market conditions. Three widely used valuation techniques are the market approach, the cost approach and the income approach. The main aspects of those approaches are summarised in paragraphs B5–B11. An entity shall use valuation techniques consistent with one or more of those approaches to measure fair value. |
63 |
In some cases a single valuation technique will be appropriate (eg when valuing an asset or a liability using quoted prices in an active market for identical assets or liabilities). In other cases, multiple valuation techniques will be appropriate (eg that might be the case when valuing a cash-generating unit). If multiple valuation techniques are used to measure fair value, the results (ie respective indications of fair value) shall be evaluated considering the reasonableness of the range of values indicated by those results. A fair value measurement is the point within that range that is most representative of fair value in the circumstances. |
64 |
If the transaction price is fair value at initial recognition and a valuation technique that uses unobservable inputs will be used to measure fair value in subsequent periods, the valuation technique shall be calibrated so that at initial recognition the result of the valuation technique equals the transaction price. Calibration ensures that the valuation technique reflects current market conditions, and it helps an entity to determine whether an adjustment to the valuation technique is necessary (eg there might be a characteristic of the asset or liability that is not captured by the valuation technique). After initial recognition, when measuring fair value using a valuation technique or techniques that use unobservable inputs, an entity shall ensure that those valuation techniques reflect observable market data (eg the price for a similar asset or liability) at the measurement date. |
65 |
Valuation techniques used to measure fair value shall be applied consistently. However, a change in a valuation technique or its application (eg a change in its weighting when multiple valuation techniques are used or a change in an adjustment applied to a valuation technique) is appropriate if the change results in a measurement that is equally or more representative of fair value in the circumstances. That might be the case if, for example, any of the following events take place:
|
66 |
Revisions resulting from a change in the valuation technique or its application shall be accounted for as a change in accounting estimate in accordance with IAS 8. However, the disclosures in IAS 8 for a change in accounting estimate are not required for revisions resulting from a change in a valuation technique or its application. |
Inputs to valuation techniques
General principles
67 |
Valuation techniques used to measure fair value shall maximise the use of relevant observable inputs and minimise the use of unobservable inputs. |
68 |
Examples of markets in which inputs might be observable for some assets and liabilities (eg financial instruments) include exchange markets, dealer markets, brokered markets and principal-to-principal markets (see paragraph B34). |
69 |
An entity shall select inputs that are consistent with the characteristics of the asset or liability that market participants would take into account in a transaction for the asset or liability (see paragraphs 11 and 12). In some cases those characteristics result in the application of an adjustment, such as a premium or discount (eg a control premium or non-controlling interest discount). However, a fair value measurement shall not incorporate a premium or discount that is inconsistent with the unit of account in the IFRS that requires or permits the fair value measurement (see paragraphs 13 and 14). Premiums or discounts that reflect size as a characteristic of the entity’s holding (specifically, a blockage factor that adjusts the quoted price of an asset or a liability because the market’s normal daily trading volume is not sufficient to absorb the quantity held by the entity, as described in paragraph 80) rather than as a characteristic of the asset or liability (eg a control premium when measuring the fair value of a controlling interest) are not permitted in a fair value measurement. In all cases, if there is a quoted price in an active market (ie a Level 1 input) for an asset or a liability, an entity shall use that price without adjustment when measuring fair value, except as specified in paragraph 79. |
Inputs based on bid and ask prices
70 |
If an asset or a liability measured at fair value has a bid price and an ask price (eg an input from a dealer market), the price within the bid-ask spread that is most representative of fair value in the circumstances shall be used to measure fair value regardless of where the input is categorised within the fair value hierarchy (ie Level 1, 2 or 3; see paragraphs 72–90). The use of bid prices for asset positions and ask prices for liability positions is permitted, but is not required. |
71 |
This IFRS does not preclude the use of mid-market pricing or other pricing conventions that are used by market participants as a practical expedient for fair value measurements within a bid-ask spread. |
Fair value hierarchy
72 |
To increase consistency and comparability in fair value measurements and related disclosures, this IFRS establishes a fair value hierarchy that categorises into three levels (see paragraphs 76–90) the inputs to valuation techniques used to measure fair value. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1 inputs) and the lowest priority to unobservable inputs (Level 3 inputs). |
73 |
In some cases, the inputs used to measure the fair value of an asset or a liability might be categorised within different levels of the fair value hierarchy. In those cases, the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. Assessing the significance of a particular input to the entire measurement requires judgement, taking into account factors specific to the asset or liability. Adjustments to arrive at measurements based on fair value, such as costs to sell when measuring fair value less costs to sell, shall not be taken into account when determining the level of the fair value hierarchy within which a fair value measurement is categorised. |
74 |
The availability of relevant inputs and their relative subjectivity might affect the selection of appropriate valuation techniques (see paragraph 61). However, the fair value hierarchy prioritises the inputs to valuation techniques, not the valuation techniques used to measure fair value. For example, a fair value measurement developed using a present value technique might be categorised within Level 2 or Level 3, depending on the inputs that are significant to the entire measurement and the level of the fair value hierarchy within which those inputs are categorised. |
75 |
If an observable input requires an adjustment using an unobservable input and that adjustment results in a significantly higher or lower fair value measurement, the resulting measurement would be categorised within Level 3 of the fair value hierarchy. For example, if a market participant would take into account the effect of a restriction on the sale of an asset when estimating the price for the asset, an entity would adjust the quoted price to reflect the effect of that restriction. If that quoted price is a Level 2 input and the adjustment is an unobservable input that is significant to the entire measurement, the measurement would be categorised within Level 3 of the fair value hierarchy. |
Level 1 inputs
76 |
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. |
77 |
A quoted price in an active market provides the most reliable evidence of fair value and shall be used without adjustment to measure fair value whenever available, except as specified in paragraph 79. |
78 |
A Level 1 input will be available for many financial assets and financial liabilities, some of which might be exchanged in multiple active markets (eg on different exchanges). Therefore, the emphasis within Level 1 is on determining both of the following:
|
79 |
An entity shall not make an adjustment to a Level 1 input except in the following circumstances:
|
80 |
If an entity holds a position in a single asset or liability (including a position comprising a large number of identical assets or liabilities, such as a holding of financial instruments) and the asset or liability is traded in an active market, the fair value of the asset or liability shall be measured within Level 1 as the product of the quoted price for the individual asset or liability and the quantity held by the entity. That is the case even if a market’s normal daily trading volume is not sufficient to absorb the quantity held and placing orders to sell the position in a single transaction might affect the quoted price. |
Level 2 inputs
81 |
Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. |
82 |
If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability. Level 2 inputs include the following:
|
83 |
Adjustments to Level 2 inputs will vary depending on factors specific to the asset or liability. Those factors include the following:
|
84 |
An adjustment to a Level 2 input that is significant to the entire measurement might result in a fair value measurement categorised within Level 3 of the fair value hierarchy if the adjustment uses significant unobservable inputs. |
85 |
Paragraph B35 describes the use of Level 2 inputs for particular assets and liabilities. |
Level 3 inputs
86 |
Level 3 inputs are unobservable inputs for the asset or liability. |
87 |
Unobservable inputs shall be used to measure fair value to the extent that relevant observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date. However, the fair value measurement objective remains the same, ie an exit price at the measurement date from the perspective of a market participant that holds the asset or owes the liability. Therefore, unobservable inputs shall reflect the assumptions that market participants would use when pricing the asset or liability, including assumptions about risk. |
88 |
Assumptions about risk include the risk inherent in a particular valuation technique used to measure fair value (such as a pricing model) and the risk inherent in the inputs to the valuation technique. A measurement that does not include an adjustment for risk would not represent a fair value measurement if market participants would include one when pricing the asset or liability. For example, it might be necessary to include a risk adjustment when there is significant measurement uncertainty (eg when there has been a significant decrease in the volume or level of activity when compared with normal market activity for the asset or liability, or similar assets or liabilities, and the entity has determined that the transaction price or quoted price does not represent fair value, as described in paragraphs B37–B47). |
89 |
An entity shall develop unobservable inputs using the best information available in the circumstances, which might include the entity’s own data. In developing unobservable inputs, an entity may begin with its own data, but it shall adjust those data if reasonably available information indicates that other market participants would use different data or there is something particular to the entity that is not available to other market participants (eg an entity-specific synergy). An entity need not undertake exhaustive efforts to obtain information about market participant assumptions. However, an entity shall take into account all information about market participant assumptions that is reasonably available. Unobservable inputs developed in the manner described above are considered market participant assumptions and meet the objective of a fair value measurement. |
90 |
Paragraph B36 describes the use of Level 3 inputs for particular assets and liabilities. |
DISCLOSURE
91 |
An entity shall disclose information that helps users of its financial statements assess both of the following:
|
92 |
To meet the objectives in paragraph 91, an entity shall consider all the following:
If the disclosures provided in accordance with this IFRS and other IFRSs are insufficient to meet the objectives in paragraph 91, an entity shall disclose additional information necessary to meet those objectives. |
93 |
To meet the objectives in paragraph 91, an entity shall disclose, at a minimum, the following information for each class of assets and liabilities (see paragraph 94 for information on determining appropriate classes of assets and liabilities) measured at fair value (including measurements based on fair value within the scope of this IFRS) in the statement of financial position after initial recognition:
|
94 |
An entity shall determine appropriate classes of assets and liabilities on the basis of the following:
The number of classes may need to be greater for fair value measurements categorised within Level 3 of the fair value hierarchy because those measurements have a greater degree of uncertainty and subjectivity. Determining appropriate classes of assets and liabilities for which disclosures about fair value measurements should be provided requires judgement. A class of assets and liabilities will often require greater disaggregation than the line items presented in the statement of financial position. However, an entity shall provide information sufficient to permit reconciliation to the line items presented in the statement of financial position. If another IFRS specifies the class for an asset or a liability, an entity may use that class in providing the disclosures required in this IFRS if that class meets the requirements in this paragraph. |
95 |
An entity shall disclose and consistently follow its policy for determining when transfers between levels of the fair value hierarchy are deemed to have occurred in accordance with paragraph 93(c) and (e)(iv). The policy about the timing of recognising transfers shall be the same for transfers into the levels as for transfers out of the levels. Examples of policies for determining the timing of transfers include the following:
|
96 |
If an entity makes an accounting policy decision to use the exception in paragraph 48, it shall disclose that fact. |
97 |
For each class of assets and liabilities not measured at fair value in the statement of financial position but for which the fair value is disclosed, an entity shall disclose the information required by paragraph 93(b), (d) and (i). However, an entity is not required to provide the quantitative disclosures about significant unobservable inputs used in fair value measurements categorised within Level 3 of the fair value hierarchy required by paragraph 93(d). For such assets and liabilities, an entity does not need to provide the other disclosures required by this IFRS. |
98 |
For a liability measured at fair value and issued with an inseparable third-party credit enhancement, an issuer shall disclose the existence of that credit enhancement and whether it is reflected in the fair value measurement of the liability. |
99 |
An entity shall present the quantitative disclosures required by this IFRS in a tabular format unless another format is more appropriate. |
Appendix A
Defined terms
This appendix is an integral part of the IFRS.
active market |
A market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. |
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cost approach |
A valuation technique that reflects the amount that would be required currently to replace the service capacity of an asset (often referred to as current replacement cost). |
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entry price |
The price paid to acquire an asset or received to assume a liability in an exchange transaction. |
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exit price |
The price that would be received to sell an asset or paid to transfer a liability. |
||||||||
expected cash flow |
The probability-weighted average (ie mean of the distribution) of possible future cash flows. |
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fair value |
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. |
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highest and best use |
The use of a non-financial asset by market participants that would maximise the value of the asset or the group of assets and liabilities (eg a business) within which the asset would be used. |
||||||||
income approach |
Valuation techniques that convert future amounts (eg cash flows or income and expenses) to a single current (ie discounted) amount. The fair value measurement is determined on the basis of the value indicated by current market expectations about those future amounts. |
||||||||
Inputs |
The assumptions that market participants would use when pricing the asset or liability, including assumptions about risk, such as the following:
Inputs may be observable or unobservable. |
||||||||
Level 1 inputs |
Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. |
||||||||
Level 2 inputs |
Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. |
||||||||
Level 3 inputs |
Unobservable inputs for the asset or liability. |
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market approach |
A valuation technique that uses prices and other relevant information generated by market transactions involving identical or comparable (ie similar) assets, liabilities or a group of assets and liabilities, such as a business. |
||||||||
market-corroborated inputs |
Inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
||||||||
market participants |
Buyers and sellers in the principal (or most advantageous) market for the asset or liability that have all of the following characteristics:
|
||||||||
most advantageous market |
The market that maximises the amount that would be received to sell the asset or minimises the amount that would be paid to transfer the liability, after taking into account transaction costs and transport costs. |
||||||||
non-performance risk |
The risk that an entity will not fulfil an obligation. Non-performance risk includes, but may not be limited to, the entity’s own credit risk. |
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observable inputs |
Inputs that are developed using market data, such as publicly available information about actual events or transactions, and that reflect the assumptions that market participants would use when pricing the asset or liability. |
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orderly transaction |
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 transactions involving such assets or liabilities; it is not a forced transaction (eg a forced liquidation or distress sale). |
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principal market |
The market with the greatest volume and level of activity for the asset or liability. |
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risk premium |
Compensation sought by risk-averse market participants for bearing the uncertainty inherent in the cash flows of an asset or a liability. Also referred to as a ‘risk adjustment’. |
||||||||
transaction costs |
The costs to sell an asset or transfer a liability in the principal (or most advantageous) market for the asset or liability that are directly attributable to the disposal of the asset or the transfer of the liability and meet both of the following criteria:
|
||||||||
transport costs |
The costs that would be incurred to transport an asset from its current location to its principal (or most advantageous) market. |
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unit of account |
The level at which an asset or a liability is aggregated or disaggregated in an IFRS for recognition purposes. |
||||||||
unobservable inputs |
Inputs for which market data are not available and that are developed using the best information available about the assumptions that market participants would use when pricing the asset or liability. |
Appendix B
Application guidance
This appendix is an integral part of the IFRS. It describes the application of paragraphs 1–99 and has the same authority as the other parts of the IFRS.
B1 |
The judgements applied in different valuation situations may be different. This appendix describes the judgements that might apply when an entity measures fair value in different valuation situations. |
THE FAIR VALUE MEASUREMENT APPROACH
B2 |
The objective of a fair value measurement is to estimate the price at which an orderly transaction to sell the asset or to transfer the liability would take place between market participants at the measurement date under current market conditions. A fair value measurement requires an entity to determine all the following:
|
VALUATION PREMISE FOR NON-FINANCIAL ASSETS (PARAGRAPHS 31–33)
B3 |
When measuring the fair value of a non-financial asset used in combination with other assets as a group (as installed or otherwise configured for use) or in combination with other assets and liabilities (eg a business), the effect of the valuation premise depends on the circumstances. For example:
|
FAIR VALUE AT INITIAL RECOGNITION (PARAGRAPHS 57–60)
B4 |
When determining whether fair value at initial recognition equals the transaction price, an entity shall take into account factors specific to the transaction and to the asset or liability. For example, the transaction price might not represent the fair value of an asset or a liability at initial recognition if any of the following conditions exist:
|
VALUATION TECHNIQUES (PARAGRAPHS 61–66)
Market approach
B5 |
The market approach uses prices and other relevant information generated by market transactions involving identical or comparable (ie similar) assets, liabilities or a group of assets and liabilities, such as a business. |
B6 |
For example, valuation techniques consistent with the market approach often use market multiples derived from a set of comparables. Multiples might be in ranges with a different multiple for each comparable. The selection of the appropriate multiple within the range requires judgement, considering qualitative and quantitative factors specific to the measurement. |
B7 |
Valuation techniques consistent with the market approach include matrix pricing. Matrix pricing is a mathematical technique used principally to value some types of financial instruments, such as debt securities, without relying exclusively on quoted prices for the specific securities, but rather relying on the securities’ relationship to other benchmark quoted securities. |
Cost approach
B8 |
The cost approach reflects the amount that would be required currently to replace the service capacity of an asset (often referred to as current replacement cost). |
B9 |
From the perspective of a market participant seller, the price that would be received for the asset is based on the cost to a market participant buyer to acquire or construct a substitute asset of comparable utility, adjusted for obsolescence. That is because a market participant buyer would not pay more for an asset than the amount for which it could replace the service capacity of that asset. Obsolescence encompasses physical deterioration, functional (technological) obsolescence and economic (external) obsolescence and is broader than depreciation for financial reporting purposes (an allocation of historical cost) or tax purposes (using specified service lives). In many cases the current replacement cost method is used to measure the fair value of tangible assets that are used in combination with other assets or with other assets and liabilities. |
Income approach
B10 |
The income approach converts future amounts (eg cash flows or income and expenses) to a single current (ie discounted) amount. When the income approach is used, the fair value measurement reflects current market expectations about those future amounts. |
B11 |
Those valuation techniques include, for example, the following:
|
Present value techniques
B12 |
Paragraphs B13–B30 describe the use of present value techniques to measure fair value. Those paragraphs focus on a discount rate adjustment technique and an expected cash flow (expected present value) technique. Those paragraphs neither prescribe the use of a single specific present value technique nor limit the use of present value techniques to measure fair value to the techniques discussed. The present value technique used to measure fair value will depend on facts and circumstances specific to the asset or liability being measured (eg whether prices for comparable assets or liabilities can be observed in the market) and the availability of sufficient data. |
The components of a present value measurement
B13 |
Present value (ie an application of the income approach) is a tool used to link future amounts (eg cash flows or values) to a present amount using a discount rate. A fair value measurement of an asset or a liability using a present value technique captures all the following elements from the perspective of market participants at the measurement date:
|
General principles
B14 |
Present value techniques differ in how they capture the elements in paragraph B13. However, all the following general principles govern the application of any present value technique used to measure fair value:
|
Risk and uncertainty
B15 |
A fair value measurement using present value techniques is made under conditions of uncertainty because the cash flows used are estimates rather than known amounts. In many cases both the amount and timing of the cash flows are uncertain. Even contractually fixed amounts, such as the payments on a loan, are uncertain if there is risk of default. |
B16 |
Market participants generally seek compensation (ie a risk premium) for bearing the uncertainty inherent in the cash flows of an asset or a liability. A fair value measurement should include a risk premium reflecting the amount that market participants would demand as compensation for the uncertainty inherent in the cash flows. Otherwise, the measurement would not faithfully represent fair value. In some cases determining the appropriate risk premium might be difficult. However, the degree of difficulty alone is not a sufficient reason to exclude a risk premium. |
B17 |
Present value techniques differ in how they adjust for risk and in the type of cash flows they use. For example:
|
Discount rate adjustment technique
B18 |
The discount rate adjustment technique uses a single set of cash flows from the range of possible estimated amounts, whether contractual or promised (as is the case for a bond) or most likely cash flows. In all cases, those cash flows are conditional upon the occurrence of specified events (eg contractual or promised cash flows for a bond are conditional on the event of no default by the debtor). The discount rate used in the discount rate adjustment technique is derived from observed rates of return for comparable assets or liabilities that are traded in the market. Accordingly, the contractual, promised or most likely cash flows are discounted at an observed or estimated market rate for such conditional cash flows (ie a market rate of return). |
B19 |
The discount rate adjustment technique requires an analysis of market data for comparable assets or liabilities. Comparability is established by considering the nature of the cash flows (eg whether the cash flows are contractual or non-contractual and are likely to respond similarly to changes in economic conditions), as well as other factors (eg credit standing, collateral, duration, restrictive covenants and liquidity). Alternatively, if a single comparable asset or liability does not fairly reflect the risk inherent in the cash flows of the asset or liability being measured, it may be possible to derive a discount rate using data for several comparable assets or liabilities in conjunction with the risk-free yield curve (ie using a ‘build-up’ approach). |
B20 |
To illustrate a build-up approach, assume that Asset A is a contractual right to receive CU800 (1) in one year (ie there is no timing uncertainty). There is an established market for comparable assets, and information about those assets, including price information, is available. Of those comparable assets:
|
B21 |
On the basis of the timing of the contractual payments to be received for Asset A relative to the timing for Asset B and Asset C (ie one year for Asset B versus two years for Asset C), Asset B is deemed more comparable to Asset A. Using the contractual payment to be received for Asset A (CU800) and the one-year market rate derived from Asset B (10,8 per cent), the fair value of Asset A is CU722 (CU800/1,108). Alternatively, in the absence of available market information for Asset B, the one-year market rate could be derived from Asset C using the build-up approach. In that case the two-year market rate indicated by Asset C (11,2 per cent) would be adjusted to a one-year market rate using the term structure of the risk-free yield curve. Additional information and analysis might be required to determine whether the risk premiums for one-year and two-year assets are the same. If it is determined that the risk premiums for one-year and two-year assets are not the same, the two-year market rate of return would be further adjusted for that effect. |
B22 |
When the discount rate adjustment technique is applied to fixed receipts or payments, the adjustment for risk inherent in the cash flows of the asset or liability being measured is included in the discount rate. In some applications of the discount rate adjustment technique to cash flows that are not fixed receipts or payments, an adjustment to the cash flows may be necessary to achieve comparability with the observed asset or liability from which the discount rate is derived. |
Expected present value technique
B23 |
The expected present value technique uses as a starting point a set of cash flows that represents the probability-weighted average of all possible future cash flows (ie the expected cash flows). The resulting estimate is identical to expected value, which, in statistical terms, is the weighted average of a discrete random variable’s possible values with the respective probabilities as the weights. Because all possible cash flows are probability-weighted, the resulting expected cash flow is not conditional upon the occurrence of any specified event (unlike the cash flows used in the discount rate adjustment technique). |
B24 |
In making an investment decision, risk-averse market participants would take into account the risk that the actual cash flows may differ from the expected cash flows. Portfolio theory distinguishes between two types of risk:
Portfolio theory holds that in a market in equilibrium, market participants will be compensated only for bearing the systematic risk inherent in the cash flows. (In markets that are inefficient or out of equilibrium, other forms of return or compensation might be available.) |
B25 |
Method 1 of the expected present value technique adjusts the expected cash flows of an asset for systematic (ie market) risk by subtracting a cash risk premium (ie risk-adjusted expected cash flows). Those risk-adjusted expected cash flows represent a certainty-equivalent cash flow, which is discounted at a risk-free interest rate. A certainty-equivalent cash flow refers to an expected cash flow (as defined), adjusted for risk so that a market participant is indifferent to trading a certain cash flow for an expected cash flow. For example, if a market participant was willing to trade an expected cash flow of CU1,200 for a certain cash flow of CU1,000, the CU1,000 is the certainty equivalent of the CU1,200 (ie the CU200 would represent the cash risk premium). In that case the market participant would be indifferent as to the asset held. |
B26 |
In contrast, Method 2 of the expected present value technique adjusts for systematic (ie market) risk by applying a risk premium to the risk-free interest rate. Accordingly, the expected cash flows are discounted at a rate that corresponds to an expected rate associated with probability-weighted cash flows (ie an expected rate of return). Models used for pricing risky assets, such as the capital asset pricing model, can be used to estimate the expected rate of return. Because the discount rate used in the discount rate adjustment technique is a rate of return relating to conditional cash flows, it is likely to be higher than the discount rate used in Method 2 of the expected present value technique, which is an expected rate of return relating to expected or probability-weighted cash flows. |
B27 |
To illustrate Methods 1 and 2, assume that an asset has expected cash flows of CU780 in one year determined on the basis of the possible cash flows and probabilities shown below. The applicable risk-free interest rate for cash flows with a one-year horizon is 5 per cent, and the systematic risk premium for an asset with the same risk profile is 3 per cent.
|
B28 |
In this simple illustration, the expected cash flows (CU780) represent the probability-weighted average of the three possible outcomes. In more realistic situations, there could be many possible outcomes. However, to apply the expected present value technique, it is not always necessary to take into account distributions of all possible cash flows using complex models and techniques. Rather, it might be possible to develop a limited number of discrete scenarios and probabilities that capture the array of possible cash flows. For example, an entity might use realised cash flows for some relevant past period, adjusted for changes in circumstances occurring subsequently (eg changes in external factors, including economic or market conditions, industry trends and competition as well as changes in internal factors affecting the entity more specifically), taking into account the assumptions of market participants. |
B29 |
In theory, the present value (ie the fair value) of the asset’s cash flows is the same whether determined using Method 1 or Method 2, as follows:
|
B30 |
When using an expected present value technique to measure fair value, either Method 1 or Method 2 could be used. The selection of Method 1 or Method 2 will depend on facts and circumstances specific to the asset or liability being measured, the extent to which sufficient data are available and the judgements applied. |
APPLYING PRESENT VALUE TECHNIQUES TO LIABILITIES AND AN ENTITY’S OWN EQUITY INSTRUMENTS NOT HELD BY OTHER PARTIES AS ASSETS (PARAGRAPHS 40 AND 41)
B31 |
When using a present value technique to measure the fair value of a liability that is not held by another party as an asset (eg a decommissioning liability), an entity shall, among other things, estimate the future cash outflows that market participants would expect to incur in fulfilling the obligation. Those future cash outflows shall include market participants’ expectations about the costs of fulfilling the obligation and the compensation that a market participant would require for taking on the obligation. Such compensation includes the return that a market participant would require for the following:
|
B32 |
For example, a non-financial liability does not contain a contractual rate of return and there is no observable market yield for that liability. In some cases the components of the return that market participants would require will be indistinguishable from one another (eg when using the price a third party contractor would charge on a fixed fee basis). In other cases an entity needs to estimate those components separately (eg when using the price a third party contractor would charge on a cost plus basis because the contractor in that case would not bear the risk of future changes in costs). |
B33 |
An entity can include a risk premium in the fair value measurement of a liability or an entity’s own equity instrument that is not held by another party as an asset in one of the following ways:
An entity shall ensure that it does not double-count or omit adjustments for risk. For example, if the estimated cash flows are increased to take into account the compensation for assuming the risk associated with the obligation, the discount rate should not be adjusted to reflect that risk. |
INPUTS TO VALUATION TECHNIQUES (PARAGRAPHS 67–71)
B34 |
Examples of markets in which inputs might be observable for some assets and liabilities (eg financial instruments) include the following:
|
FAIR VALUE HIERARCHY (PARAGRAPHS 72–90)
Level 2 inputs (paragraphs 81–85)
B35 |
Examples of Level 2 inputs for particular assets and liabilities include the following:
|
Level 3 inputs (paragraphs 86–90)
B36 |
Examples of Level 3 inputs for particular assets and liabilities include the following:
|
MEASURING FAIR VALUE WHEN THE VOLUME OR LEVEL OF ACTIVITY FOR AN ASSET OR A LIABILITY HAS SIGNIFICANTLY DECREASED
B37 |
The fair value of an asset or a liability might be affected when there has been a significant decrease in the volume or level of activity for that asset or liability in relation to normal market activity for the asset or liability (or similar assets or liabilities). To determine whether, on the basis of the evidence available, there has been a significant decrease in the volume or level of activity for the asset or liability, an entity shall evaluate the significance and relevance of factors such as the following:
|
B38 |
If an entity concludes that there has been a significant decrease in the volume or level of activity for the asset or liability in relation to normal market activity for the asset or liability (or similar assets or liabilities), further analysis of the transactions or quoted prices is needed. A decrease in the volume or level of activity on its own may not indicate that a transaction price or quoted price does not represent fair value or that a transaction in that market is not orderly. However, if an entity determines that a transaction or quoted price does not represent fair value (eg there may be transactions that are not orderly), an adjustment to the transactions or quoted prices will be necessary if the entity uses those prices as a basis for measuring fair value and that adjustment may be significant to the fair value measurement in its entirety. Adjustments also may be necessary in other circumstances (eg when a price for a similar asset requires significant adjustment to make it comparable to the asset being measured or when the price is stale). |
B39 |
This IFRS does not prescribe a methodology for making significant adjustments to transactions or quoted prices. See paragraphs 61–66 and B5–B11 for a discussion of the use of valuation techniques when measuring fair value. Regardless of the valuation technique used, an entity shall include appropriate risk adjustments, including a risk premium reflecting the amount that market participants would demand as compensation for the uncertainty inherent in the cash flows of an asset or a liability (see paragraph B17). Otherwise, the measurement does not faithfully represent fair value. In some cases determining the appropriate risk adjustment might be difficult. However, the degree of difficulty alone is not a sufficient basis on which to exclude a risk adjustment. The risk adjustment shall be reflective of an orderly transaction between market participants at the measurement date under current market conditions. |
B40 |
If there has been a significant decrease in the volume or level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate (eg the use of a market approach and a present value technique). When weighting indications of fair value resulting from the use of multiple valuation techniques, an entity shall consider the reasonableness of the range of fair value measurements. The objective is to determine the point within the range that is most representative of fair value under current market conditions. A wide range of fair value measurements may be an indication that further analysis is needed. |
B41 |
Even when there has been a significant decrease in the volume or level of activity for the asset or liability, the objective of a fair value measurement remains the same. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction (ie not a forced liquidation or distress sale) between market participants at the measurement date under current market conditions. |
B42 |
Estimating the price at which market participants would be willing to enter into a transaction at the measurement date under current market conditions if there has been a significant decrease in the volume or level of activity for the asset or liability depends on the facts and circumstances at the measurement date and requires judgement. An entity’s intention to hold the asset or to settle or otherwise fulfil the liability is not relevant when measuring fair value because fair value is a market-based measurement, not an entity-specific measurement. |
Identifying transactions that are not orderly
B43 |
The determination of whether a transaction is orderly (or is not orderly) is more difficult if there has been a significant decrease in the volume or level of activity for the asset or liability in relation to normal market activity for the asset or liability (or similar assets or liabilities). In such circumstances it is not appropriate to conclude that all transactions in that market are not orderly (ie forced liquidations or distress sales). Circumstances that may indicate that a transaction is not orderly include the following:
An entity shall evaluate the circumstances to determine whether, on the weight of the evidence available, the transaction is orderly. |
B44 |
An entity shall consider all the following when measuring fair value or estimating market risk premiums:
An entity need not undertake exhaustive efforts to determine whether a transaction is orderly, but it shall not ignore information that is reasonably available. When an entity is a party to a transaction, it is presumed to have sufficient information to conclude whether the transaction is orderly. |
Using quoted prices provided by third parties
B45 |
This IFRS does not preclude the use of quoted prices provided by third parties, such as pricing services or brokers, if an entity has determined that the quoted prices provided by those parties are developed in accordance with this IFRS. |
B46 |
If there has been a significant decrease in the volume or level of activity for the asset or liability, an entity shall evaluate whether the quoted prices provided by third parties are developed using current information that reflects orderly transactions or a valuation technique that reflects market participant assumptions (including assumptions about risk). In weighting a quoted price as an input to a fair value measurement, an entity places less weight (when compared with other indications of fair value that reflect the results of transactions) on quotes that do not reflect the result of transactions. |
B47 |
Furthermore, the nature of a quote (eg whether the quote is an indicative price or a binding offer) shall be taken into account when weighting the available evidence, with more weight given to quotes provided by third parties that represent binding offers. |
Appendix C
Effective date and transition
This appendix is an integral part of the IFRS and has the same authority as the other parts of the IFRS.
C1 |
An entity shall apply this IFRS for annual periods beginning on or after 1 January 2013. Earlier application is permitted. If an entity applies this IFRS for an earlier period, it shall disclose that fact. |
C2 |
This IFRS shall be applied prospectively as of the beginning of the annual period in which it is initially applied. |
C3 |
The disclosure requirements of this IFRS need not be applied in comparative information provided for periods before initial application of this IFRS. |
Appendix D
Amendments to other IFRSs
This appendix sets out amendments to other IFRSs that are a consequence of the Board issuing IFRS 13. An entity shall apply the amendments for annual periods beginning on or after 1 January 2013. If an entity applies IFRS 13 for an earlier period, it shall apply the amendments for that earlier period. Amended paragraphs are shown with new text underlined and deleted text struck through.
CHANGE IN DEFINITION
D1 |
In IFRSs 1, 3–5 and 9 (issued in October 2010) the definition of fair value is replaced with: 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 measurement date. (See IFRS 13.) In IASs 2, 16, 18–21, 32 and 40 the definition of fair value is replaced with: 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 measurement date. (See IFRS 13 Fair Value Measurement.) |
IFRS 1 First-time Adoption of International Financial Reporting Standards (as amended at September 2010)
D2 |
Paragraph 19 is deleted. |
D3 |
Paragraph 39J is added as follows:
|
D4 |
Paragraphs D15 and D20 are amended as follows:
|
IFRS 2 Share-based Payment
D5 |
Paragraph 6A is added as follows:
|
IFRS 3 Business Combinations
D6 |
Paragraphs 20, 29, 33 and 47 are amended as follows:
|
D7 |
Paragraph 64F is added as follows:
|
D8 |
In Appendix B paragraphs B22 and B40, B43–B46, B49 and B64 are amended as follows:
|
IFRS 4 Insurance Contracts
D9 |
Paragraph 41E is added as follows:
|
IFRS 5 Non-current Assets Held for Sale and Discontinued Operations
D10 |
Paragraph 44H is added as follows:
|
IFRS 7 Financial Instruments: Disclosures (as amended at October 2009)
D11 |
[Not applicable to requirements] |
D12 |
Paragraph 3 is amended as follows:
|
D13 |
Paragraphs 27–27B are deleted. |
D14 |
Paragraph 28 is amended as follows:
|
D15 |
Paragraph 29 is amended as follows:
|
D16 |
Paragraph 44P is added as follows:
|
D17 |
In Appendix A the definition of other price risk is amended as follows:
|
IFRS 9 Financial Instruments (issued November 2009)
D18 |
Paragraph 5.1.1 is amended as follows:
|
D19 |
Paragraph 5.1.1A is added as follows:
|
D20 |
Paragraphs 5.2.1, 5.3.2, 8.2.5 and 8.2.11 are amended as follows:
|
D21 |
Paragraph 8.1.3 is added as follows:
|
D22 |
In Appendix A the introductory text is amended as follows: The following terms are defined in paragraph 11 of IAS 32 Financial Instruments: Presentation, paragraph 9 of IAS 39 or Appendix A of IFRS 13 and are used in this IFRS with the meanings specified in IAS 32, IAS 39 or IFRS 13: … |
D23 |
In Appendix B paragraph B5.1, the heading above paragraph B5.5 and paragraphs B5.5 and B5.7 are amended as follows:
Investments in equity instruments and contracts on those investments
|
IFRS 9 Financial Instruments (issued October 2010)
D29 |
[Not applicable to requirements] |
D30 |
Paragraphs 3.2.14, 4.3.7 and 5.1.1 are amended as follows:
|
D31 |
Paragraph 5.1.1A is added as follows:
|
D32 |
Paragraph 5.2.1 is amended as follows:
|
D33 |
The heading above paragraph 5.4.1 and paragraphs 5.4.1–5.4.3 are deleted. |
D34 |
Paragraphs 5.6.2, 7.2.5, 7.2.11 and 7.2.12 are amended as follows:
|
D35 |
Paragraph 7.1.3 is added as follows:
|
D36 |
In Appendix B paragraphs B3.2.11, B3.2.17, B5.1.1 and B5.2.2 are amended as follows:
|
D37 |
Paragraphs B5.1.2A and B5.2.2A are added as follows:
|
D38 |
Paragraphs B5.4.1–B5.4.13 and their related headings are deleted. |
D39 |
The heading above paragraph B5.4.14 and paragraphs B5.4.14, B5.4.16 and B5.7.20 are amended as follows: Investments in equity instruments and contracts on those investments
|
D40 |
In Appendix C, in paragraph C3 the amendments to paragraphs D15 and D20 of IFRS 1 First-time Adoption of International Financial Reporting Standards are amended as follows:
|
D41 |
In paragraph C11 the amendments to paragraph 28 of IFRS 7 Financial Instruments: Disclosures are amended as follows:
|
D42 |
In paragraph C26 the amendments to paragraph 1 of IAS 28 Investments in Associates are amended as follows:
|
D43 |
In paragraph C28 the amendments to paragraph 1 of IAS 31 Interests in Joint Ventures are amended as follows:
|
D44 |
In paragraph C30 the amendments to paragraph 23 of IAS 32 Financial Instruments: Presentation are amended as follows:
|
D45 |
In paragraph C49 the amendments to paragraph A8 of IFRIC 2 Members’ Shares in Co-operative Entities and Similar Instruments are amended as follows:
|
D46 |
In paragraph C53 the amendments to paragraph 7 of IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments are amended as follows:
|
IAS 1 Presentation of Financial Statements
D47 |
Paragraphs 128 and 133 are amended as follows:
|
D48 |
Paragraph 139I is added as follows:
|
IAS 2 Inventories
D49 |
Paragraph 7 is amended as follows:
|
D50 |
Paragraph 40C is added as follows:
|
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
D51 |
Paragraph 52 is amended as follows:
|
D52 |
Paragraph 54C is added as follows:
|
IAS 10 Events after the Reporting Period
D53 |
Paragraph 11 is amended as follows:
|
D54 |
Paragraph 23A is added as follows:
|
IAS 16 Property, Plant and Equipment
D55 |
Paragraph 26 is amended as follows:
|
D56 |
Paragraphs 32 and 33 are deleted. |
D57 |
Paragraphs 35 and 77 are amended as follows:
|
D58 |
Paragraph 81F is added as follows:
|
IAS 17 Leases
D59 |
Paragraph 6A is added as follows:
|
IAS 18 Revenue
D60 |
Paragraph 42 is added as follows:
|
IAS 19 Employee Benefits
D61 |
[Not applicable to requirements] |
D62 |
Paragraphs 50 and 102 are amended as follows:
|
D63 |
Paragraph 162 is added as follows:
|
IAS 20 Accounting for Government Grants and Disclosure of Government Assistance
D64 |
Paragraph 45 is added as follows:
|
IAS 21 The Effects of Changes in Foreign Exchange Rates
D65 |
Paragraph 23 is amended as follows:
|
D66 |
Paragraph 60G is added as follows:
|
IAS 28 Investments in Associates (as amended at October 2009)
D67 |
Paragraphs 1 and 37 are amended as follows:
|
D68 |
Paragraph 41G is added as follows:
|
IAS 31 Interests in Joint Ventures (as amended at October 2009)
D69 |
Paragraph 1 is amended as follows:
|
D70 |
Paragraph 58F is added as follows:
|
IAS 32 Financial Instruments: Presentation (as amended at September 2010)
D71 |
Paragraph 23 is amended as follows:
|
D72 |
Paragraph 97J is added as follows:
|
D73 |
In the Application Guidance paragraph AG31 is amended as follows:
|
IAS 33 Earnings per Share
D74 |
Paragraphs 8 and 47A are amended as follows:
|
D75 |
Paragraph 74C is added as follows:
|
D76 |
In Appendix A paragraph A2 is amended as follows:
|
IAS 34 Interim Financial Reporting (as amended at May 2010)
D77 |
[Not applicable to requirements] |
D78 |
Paragraph 16A(j) is added as follows:
|
D79 |
Paragraph 50 is added as follows:
|
IAS 36 Impairment of Assets
D80 |
Paragraph 5 is amended as follows:
|
D81 |
Paragraph 6 is amended as follows (as a consequence of the amendment to the definition of fair value less costs to sell, all references to ‘fair value less costs to sell’ in IAS 36 are replaced with ‘fair value less costs of disposal’):
|
D82 |
Paragraphs 12, 20 and 22 are amended as follows:
|
D83 |
Paragraphs 25–27 are deleted. |
D84 |
Paragraph 28 is amended as follows:
|
D85 |
Paragraph 53A is added as follows:
|
D86 |
Paragraphs 78, 105, 111, 130 and 134 are amended as follows:
|
D87 |
Paragraph 140I is added as follows:
|
IAS 38 Intangible Assets
D88 |
Paragraph 8 is amended as follows:
|
D89 |
Paragraph 33 is amended as follows:
|
D90 |
The heading above paragraph 35 is amended as follows: Intangible asset acquired in a business combination
|
IAS 39 Financial Instruments: Recognition and Measurement (as amended at October 2009)
D96 |
[Not applicable to requirements] |
D97 |
Paragraph 9 is amended as follows:
|
D98 |
Paragraphs 13 and 28 are amended as follows:
|
D99 |
Paragraph 43A is added.
|
D100 |
Paragraph 47 is amended as follows:
|
D101 |
Paragraphs 48–49 are deleted. |
D102 |
Paragraph 88 is amended as follows:
|
D103 |
Paragraph 103Q is added as follows:
|
D104 |
In Appendix A paragraphs AG46, AG52 and AG64 are amended as follows:
|
D105 |
Paragraph AG64 is amended as follows:
|
D106 |
Paragraphs AG69–AG75 and their related headings are deleted. |
D107 |
Paragraph AG76 is amended as follows:
|
D108 |
Paragraph AG76A is amended as follows:
|
D109 |
Paragraphs AG77–AG79 are deleted. |
D110 |
Paragraphs AG80 and AG81 are amended as follows:
|
D111 |
The heading above paragraph AG82 and paragraph AG82 are deleted. |
D112 |
Paragraph AG96 is amended as follows:
|
IAS 40 Investment Property
D113 |
[Not applicable to requirements] |
D114 |
Paragraphs 26, 29 and 32 are amended as follows:
|
D115 |
Paragraphs 36–39 are deleted. |
D116 |
Paragraph 40 is amended as follows:
|
D117 |
Paragraphs 42–47, 49, 51 and 75(d) are deleted. |
D118 |
Paragraph 48 is amended as follows:
|
D119 |
The heading above paragraph 53 and paragraphs 53 and 53B are amended as follows: Inability to measure fair value reliably
|
D120 |
Paragraph 75(d) is deleted. |
D121 |
Paragraphs 78–80 are amended as follows:
|
D122 |
Paragraph 85B is amended as follows:
|
D123 |
Paragraph 85C is added as follows:
|
IAS 41 Agriculture
D124-125 |
[Not applicable to requirements] |
D126 |
Paragraphs 8, 15 and 16 are amended as follows:
|
D127 |
Paragraphs 9, 17–21 and 23 are deleted. |
D128 |
Paragraphs 25 and 30 are amended as follows:
|
D129 |
Paragraphs 47 and 48 are deleted. |
D130 |
Paragraph 61 is added as follows:
|
IFRIC 2 Members’ Shares in Co-operative Entities and Similar Instruments (as amended at October 2009)
D131 |
[Not applicable to requirements] |
D132 |
Below the heading ‘References’ a reference to IFRS 13 Fair Value Measurement is added. |
D133 |
Paragraph 16 is added as follows:
|
D134 |
In the Appendix paragraph A8 is amended as follows:
|
IFRIC 4 Determining whether an Arrangement contains a Lease
D135 |
Below the heading ‘References’ a reference to IFRS 13 Fair Value Measurement is added. |
D136 |
In paragraph 15(a) ‘fair value’ is footnoted as follows:
|
IFRIC 13 Customer Loyalty Programmes
D137 |
Below the heading ‘References’ a reference to IFRS 13 Fair Value Measurement is added. |
D138 |
Paragraph 6 is amended as follows:
|
D139 |
Paragraph 10B is added as follows:
|
D140 |
In the Application Guidance paragraphs AG1–AG3 are amended as follows:
|
IFRIC 17 Distributions of Non-cash Assets to Owners
D141 |
[Not applicable to requirements] |
D142 |
Below the heading ‘References’ a reference to IFRS 13 Fair Value Measurement is added. |
D143 |
Paragraph 17 is amended as follows:
|
D144 |
Paragraph 20 is added as follows:
|
IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments (as amended at September 2010)
D145 |
[Not applicable to requirements] |
D146 |
Below the heading ‘References’ a reference to IFRS 13 Fair Value Measurement is added. |
D147 |
Paragraph 7 is amended as follows:
|
D148 |
Paragraph 15 is added as follows:
|
IFRIC INTERPRETATION 20
Stripping Costs in the Production Phase of a Surface Mine
REFERENCES
— |
Conceptual Framework for Financial Reporting |
— |
IAS 1 Presentation of Financial Statements |
— |
IAS 2 Inventories |
— |
IAS 16 Property, Plant and Equipment |
— |
IAS 38 Intangible Assets |
BACKGROUND
1 |
In surface mining operations, entities may find it necessary to remove mine waste materials (‘overburden’) to gain access to mineral ore deposits. This waste removal activity is known as ‘stripping’. |
2 |
During the development phase of the mine (before production begins), stripping costs are usually capitalised as part of the depreciable cost of building, developing and constructing the mine. Those capitalised costs are depreciated or amortised on a systematic basis, usually by using the units of production method, once production begins. |
3 |
A mining entity may continue to remove overburden and to incur stripping costs during the production phase of the mine. |
4 |
The material removed when stripping in the production phase will not necessarily be 100 per cent waste; often it will be a combination of ore and waste. The ratio of ore to waste can range from uneconomic low grade to profitable high grade. Removal of material with a low ratio of ore to waste may produce some usable material, which can be used to produce inventory. This removal might also provide access to deeper levels of material that have a higher ratio of ore to waste. There can therefore be two benefits accruing to the entity from the stripping activity: usable ore that can be used to produce inventory and improved access to further quantities of material that will be mined in future periods. |
5 |
This Interpretation considers when and how to account separately for these two benefits arising from the stripping activity, as well as how to measure these benefits both initially and subsequently. |
SCOPE
6 |
This Interpretation applies to waste removal costs that are incurred in surface mining activity during the production phase of the mine (‘production stripping costs’). |
ISSUES
7 |
This Interpretation addresses the following issues:
|
CONSENSUS
Recognition of production stripping costs as an asset
8 |
To the extent that the benefit from the stripping activity is realised in the form of inventory produced, the entity shall account for the costs of that stripping activity in accordance with the principles of IAS 2 Inventories. To the extent the benefit is improved access to ore, the entity shall recognise these costs as a non-current asset, if the criteria in paragraph 9 below are met. This Interpretation refers to the non-current asset as the ‘stripping activity asset’. |
9 |
An entity shall recognise a stripping activity asset if, and only if, all of the following are met:
|
10 |
The stripping activity asset shall be accounted for as an addition to, or as an enhancement of, an existing asset. In other words, the stripping activity asset will be accounted for as part of an existing asset. |
11 |
The stripping activity asset’s classification as a tangible or intangible asset is the same as the existing asset. In other words, the nature of this existing asset will determine whether the entity shall classify the stripping activity asset as tangible or intangible. |
Initial measurement of the stripping activity asset
12 |
The entity shall initially measure the stripping activity asset at cost, this being the accumulation of costs directly incurred to perform the stripping activity that improves access to the identified component of ore, plus an allocation of directly attributable overhead costs. Some incidental operations may take place at the same time as the production stripping activity, but which are not necessary for the production stripping activity to continue as planned. The costs associated with these incidental operations shall not be included in the cost of the stripping activity asset. |
13 |
When the costs of the stripping activity asset and the inventory produced are not separately identifiable, the entity shall allocate the production stripping costs between the inventory produced and the stripping activity asset by using an allocation basis that is based on a relevant production measure. This production measure shall be calculated for the identified component of the ore body, and shall be used as a benchmark to identify the extent to which the additional activity of creating a future benefit has taken place. Examples of such measures include:
|
Subsequent measurement of the stripping activity asset
14 |
After initial recognition, the stripping activity asset shall be carried at either its cost or its revalued amount less depreciation or amortisation and less impairment losses, in the same way as the existing asset of which it is a part. |
15 |
The stripping activity asset shall be depreciated or amortised on a systematic basis, over the expected useful life of the identified component of the ore body that becomes more accessible as a result of the stripping activity. The units of production method shall be applied unless another method is more appropriate. |
16 |
The expected useful life of the identified component of the ore body that is used to depreciate or amortise the stripping activity asset will differ from the expected useful life that is used to depreciate or amortise the mine itself and the related life-of-mine assets. The exception to this are those limited circumstances when the stripping activity provides improved access to the whole of the remaining ore body. For example, this might occur towards the end of a mine’s useful life when the identified component represents the final part of the ore body to be extracted. |
Appendix A
Effective date and transition
This appendix is an integral part of the Interpretation and has the same authority as the other parts of the Interpretation.
A1 |
An entity shall apply this Interpretation for annual periods beginning on or after 1 January 2013. Earlier application is permitted. If an entity applies this Interpretation for an earlier period, it shall disclose that fact. |
A2 |
An entity shall apply this Interpretation to production stripping costs incurred on or after the beginning of the earliest period presented. |
A3 |
As at the beginning of the earliest period presented, any previously recognised asset balance that resulted from stripping activity undertaken during the production phase (‘predecessor stripping asset’) shall be reclassified as a part of an existing asset to which the stripping activity related, to the extent that there remains an identifiable component of the ore body with which the predecessor stripping asset can be associated. Such balances shall be depreciated or amortised over the remaining expected useful life of the identified component of the ore body to which each predecessor stripping asset balance relates. |
A4 |
If there is no identifiable component of the ore body to which that predecessor stripping asset relates, it shall be recognised in opening retained earnings at the beginning of the earliest period presented. |
Appendix B
The amendments in this appendix shall be applied for annual periods beginning on or after 1 January 2013. If an entity applies this Interpretation for an earlier period these amendments shall be applied for that earlier period.
Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards
B1 |
In Appendix D, paragraph D1 is amended as follows:
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B2 |
After paragraph D31 a heading and paragraph D32 are added: Stripping costs in the production phase of a surface mine
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B3 |
After paragraph 39L paragraph 39M is added:
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(1) In this IFRS monetary amounts are denominated in ‘currency units (CU)’.