Chapter 2: LITERATURE REVIEW
2.0 Definition of FV
“Fair” means to treat all sides in the same way, with a sense of justice and equitability according to Dictionary.com. The same source defines “value” as the monetary or material worth, as in commerce or trade. Simply put, it can be deduced that FV means a just monetary worth of a unit. FV is a remarkably mighty phrase in the English language. It, somehow, magically make us alert of those deep buried feelings to deal fairly and admit or acknowledge the true worth of something (EY, 2005). In accounting the definition of FV has evolved over time. Standard settlers, more precisely, the IASB has made continuous effort in arriving at a fair definition of the word FV. The literature will now position…show more content… (Thornton 2011; BDO, 2013)
2.2 IFRS 13: FV measurement
IFRS 13: FV Measurement is the outcome of the recently joint project of the FASB and the IASB on FV measurement (ACCA 2014). Basically, IFRS 13 gives a description of FV, sets out a foundation for measuring FV and deploys related disclosure requirements under a distinct guidance (KPMG, 2011). However, it is essential to note that IFRS 13 does not bring about any fresh requirements as to when FV Measurements are required, but rather provide guidance as to how to measure FV and disclose them when required or permitted under other standards.
IFRS 13 defines FV as “the price that would be received to sell an asset, or paid to transfer a liability in an orderly manner between market participants at the measurement…show more content… By reference to the measurement date, Shamkuts (2010) ascertained that FV should reflect the market conditions that prevail at the Balance Sheet date. The price to be used should be one in an “orderly transaction”, one that assumes that markets are functioning normally. It should not contain any aspect of stress (Kaur, 2013). If the transaction is not orderly, the price that would be arrived would not be representative of a FV (ACCA, 2014). IFRS 13 governs that a non financial asset should be priced according to its “Highest and Best Use”. Interestingly, an exit price does reflect the highest and best use for an asset (Kaur,