Download Ind AS 113- Fair Value Measurement

Ind AS 113- Fair Value
Measurement
Dr (CA) Rajkumar S Adukia,
Phd.,B.Com. (Hons.), FCA, ACS, ACMA, LL.B, Dip.IFR (UK),
MBA, DLL& LW, DIPR,Dip criminolgy
9820061049
Email id: [email protected]
1
View against FVM Purpose of
Accounting
 “Accounting provides investors with a language and tools to
make their own forecasts of future earnings growth,” Lee
says. “Most of the fair-value stuff isn’t going to help them. In
fact, it’s going to screw them up.”
 Charles M.C. Lee is Joseph McDonald Professor of Accounting at
Stanford Graduate School of Business.
2
Report and Recommendations Pursuant to Section 133 of
the Emergency Economic Stabilization Act of 2008: Study
on Mark-To-Market Accounting
 Recommendations and Related Key Findings
 SFAS No. 157 Should Be Improved, but Not Suspended
 Existing Fair Value and Mark-to-Market Requirements Should Not Be Suspended
 Additional Measures Should Be Taken to Improve the Application of Existing Fair





3
Value Requirements .
The Accounting for Financial Asset Impairments Should be Readdressed
Implement Further Guidance to Foster the Use of Sound Judgment
Accounting Standards Should Continue to Be Established to Meet the Needs of
Investors
Additional Formal Measures to Address the Operation of Existing Accounting
Standards in Practice Should Be Established
Need to Simplify the Accounting for Investments in Financial Assets
Objective of Ind AS 113
 To determine FV
 To set out a single Ind AS framework for measuring FV
 To require disclosures with respect to FV measurements
4
Standards/Transactions requiring
FVM
 Business combinations (Ind AS 103)
 Assets acquired and liabilities assumed
 Contingent consideration
 Non-controlling interests in an acquiree
 Previously held interest
 Financial instruments: Recognition and measurement (Ind AS 39)
 Assets/liabilities eligible for FV option
 Derivatives
 Hybrid financial instruments
 Financial guarantee contracts
 Debt and equity investments
5
Standards/transactions requiring
FVM
 Employee benefits— post-employment benefit obligations (Ind AS 9)
 Intangible assets— revaluation model (Ind AS 38)
 Investments in associates and joint ventures—held by mutual funds and similar








6
entities (Ind AS 28)
Property, plant and equipment—revaluation model and exchange of assets (Ind
AS 16)
Noncurrent assets held for sale and discontinued operations (Ind AS 105)
Investment property (Ind AS 40)
Agriculture—biological assets (Ind AS 41)
Impairment of assets— nonfinancial assets (Ind AS 36)
Revenue (Ind AS 18)
Consolidated and Separate Financial Statements—investments in subsidiaries by
investment entities (Ind AS 27)
Government Grants – non-monetary government grants (Ind AS 20)
Scope Exclusions
Exemption from both measurement and disclosure
requirements
 Share-based Payment (Ind AS 102)
 Standards that require or permit measurements that are
similar to FV, but that are not intended to measure FV, such
as:
 (i) Net realizable value in accordance with Ind AS 2, Inventories;
 (ii)Value-in-use measure in Ind AS 36, Impairment of Assets
 Leasing transactions within the scope of Ind AS 17, Leases.
7
Exemption from disclosure requirements only:
 Plan assets measured at FV in accordance with Ind AS 19
Employee Benefits
 Assets for which recoverable amount is FV less costs of
disposal in accordance with Ind AS 36, Impairment of Assets.
8
General Definition
 In accounting and economics, fair
value is a rational and unbiased estimate of
the potential market price of a good,
service, or asset. It takes into account such
objective factors as:
acquisition/production/distribution costs,
replacement costs, or costs of close
substitutes.
9
Ind AS 113 Appendix A [p.6]
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.
10
 FV 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
11
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).
12
Market Participants
Buyers and sellers in the principal (or most advantageous)
market for the asset or liability that have all of the following
characteristics: [KAWI]
 They are independent of each other, ie they are not related parties
as defined in Ind AS 24,
 They are knowledgeable, having a reasonable understanding about
the asset or liability
 They are able to enter into a transaction for the asset or liability.
 They are willing to enter into a transaction for the asset or
liability, ie they are motivated but not forced or otherwise
compelled to do so.
13
Entry Price Vs. Exit Price
entry price
 The price paid to acquire an asset or received to assume a
liability in an exchange transaction.
exit price
 The price that would be received to sell an asset or paid to
transfer a liability.
14
Fair Value hierarchy- [P. 76 to 90]
 The FVM standards contain a three-level hierarchy of FVM inputs
relating to FV measurements to provide greater transparency and
comparability of FV measurements and disclosures among reporting
entities.
15
Level 1
Input
• Quoted prices (unadjusted) in active markets for identical assets or
liabilities that the entity can access at the measurement date
Level 2
Input
• 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.
Valuation Techniques
 No particular technique
mandated by Ind AS 113.
 Valuation technique entity uses
must maximize the use of
relevant observable inputs
and minimize the use of
unobservable inputs
The Market Approach
The Cost Approach
The Income
Approach
16
The Market Approach
 The market approach uses prices and other relevant
information generated by market transactions involving
identical or comparable (that is, similar) assets, liabilities, or
a group of assets and liabilities, such as a business.
 It may also be used as a secondary approach to evaluate and
support the conclusions derived using other approach.
 Often used for real estate when comparable transactions and
prices are available.
 Example: Matrix Pricing
17
The Cost Approach
 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).
 It assumes that the FV would not exceed what it would cost a
market participant to acquire or construct a substitute asset
of comparable utility after adjusting for physical, functional
and economical obsolescence.
 Typically used for plant, property and equipment.
18
The Income Approach
 The income approach convert future amounts (eg cash flows or income
and expenses) to a single current (ie discounted) amount. The FV is
determined on the basis of the value indicated by current market
expectations about those future amounts.
 Eg: Discounted Cash Flow
 Steps in application of DCF:
 estimating future cash flows for a certain discrete projection period;
 estimating the terminal value, if appropriate; and
 discounting those amounts to present value at a rate of return that considers
the relative risk of the cash flows and the time value of money.
 Typically used to measure the value of liabilities, intangible assets,
businesses and financial instruments (not traded in an active market).
19
Steps in application of Ind AS 113
 Step one: determine unit of account
 Step two: determine valuation premise
 Step three: determine markets for basis of valuation
 Step four: apply the appropriate valuation technique(s)
 Step five: determine FV
 Step six: appropriate disclosures
20
21
Unit of Account
 It refers to level at which an asset or a liability is aggregated or
disaggregated in an Ind AS for recognition purposes and is
determined under the IFRS applicable to the asset or liability (or
group of assets and liabilities) that requires FV measurement.
 The determination of the unit of account must be established prior
to determining FV
 In some cases, the unit of account may not be clear and is inferred
from the recognition or measurement guidance in the applicable
standard and/or from industry practice*.
 unit of account sometimes varies depending on whether one is
considering recognition, initial measurement, or subsequent
measurement,including impairments.
22
Unit of account
Stand alone asset or
liability
Group of related
asset and/or
liabilities
Examples
Examples
•Share in Public Co.
•A derivative
Instrument
•An outstanding loan
23
•Portfolio of
receivables
•Portfolio of deposits
•A cash generating
unit
Price
 The standards provide guidance on the price as it relates to
FV.
 Transportation costs: If location is a characteristic of the asset
or liability being measured, the FV measurement should
incorporate transportation costs. For example, suppose a Tea
producing entity intends to sell its Tea by using a futures
contract on the Mysore commodity exchange. The contract
calls for physical delivery to the Mysore Railway Yard;
therefore, because the location of the Tea is an attribute of the
contract, the company should deduct the cost of physically
transporting the Tea to the sale location in the calculation of
FV. [See illustration]
24
Transaction Cost
 Transaction costs: The costs to sell an asset or transfer a liability in
the principal /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:


They result directly from and are essential to that transaction.
They would not have been incurred by the entity had the decision
to sell the asset or transfer the liability not been made
 While transaction costs are not included in the FV of the asset or
liability, these amounts are included when assessing the net
transaction proceeds to determine the most advantageous market
[See Illustration]
25
Illustration
 Suppose, Entity A has an asset that is
sold in two different markets, Market
X and Market Y with similar volumes
of activities, but with different prices
and the entity has access to both the
markets. Information from both
markets is presented as follows:
26
Market
X (Rs)
Market Y
(Rs)
Price
100
90
Transport
Cost
(10)
(5)
90
85
Transaction
Cost
10
4
Net Amount
Received
80
81
Solution
 Since none of the market are principal market, entity A
should measure FV using the price in the most advantageous
market i.e the one that maximises the amount that would be
received after taking into account transaction and transport
costs. Hence, Market Y is the most advantageous as net
proceeds (Rs.81) are more than in Market X (Rs.80).
However, the FV of the asset would be taken as Rs. 85 i.e.
the price in that market Y(Rs. 90), less transport costs (Rs. 5)
27
Valuation Premise
 Entity must assess the valuation premise based on the nature of
the asset or liability being measured
Non financial
Assets
Financial
Assets
Liabilities
28
• FV based on” highest and best use”
• Based on perspective of market participants even if entity
uses differently
• Valuation premise may be on standalone basis or as group
• “highest and best use” does not apply
• FV must be measured on a standalone basis
• Portfolio Exception
• FV based on the transfer of the liability to a market
participant on the measurement date
• If held by another party as an asset, FV determined using
the assumptions of the market participants that hold the
asset assuming access to same market.
Highest and Best Use: Non Financial
Assets
 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 ,within which the asset would be used.
 The concept refers to both
 the different ways of utilizing the individual asset, and
 the valuation premise, whether the maximum value is on a standalone
basis or in combination with other assets
 Entity considers the current use and any other use that is
financially feasible, legally permissible and physically possible.
 It is determined from the perspective of market participants, even
if the entity intends a different use. [See Illustration]
29
Highest and Best Use: Illustration
 An entity may intend to operate a property as an eating
outlet, whereas market participants would pay a higher price
to use the asset as a shopping arcade and there are no
restriction for this change in use. In this case, the FV of the
property should be based on its highest and best use (in the
principal or most advantageous market) as shopping arcade
even though entity intends to use it as eating outlet.
30
Non Financial Assets &
Portfolio/ Offsetting Exception
 Normally, the concept of highest and best use does not apply to
financial assets and liabilities. However, there is an exception to
the valuation premise when an entity manages its market risk(s)
and/or counterparty credit risk exposure within a portfolio of
financial instruments (including derivatives that meet the
definition of a financial instrument),on a net basis.
 In such cases, FV would be based on the price:
 Received to sell a net long position (i.e. an asset) for a particular risk
exposure, or
 To transfer a net short position (i.e. a liability) for a particular risk
exposure in an orderly transaction between market participants.
 Fair value of this ‘offset group’ of financial assets and financial
liabilities is made consistently with how market participants would
price the net risk exposure.
31
Portfolio/ Offsetting Exception
 Can only be used if the entity does all the following:
 Manages the offset group on the basis of net exposure to a particular
market risk (or risks) or to the credit risk of a particular counterparty
in accordance with the entity’s documented risk management
or investment strategy.
 Provides information on that basis about the offset group to the
entity’s key management personnel, as defined in Ind AS 24 Related
Party Disclosures.
 Is required (or has elected) to measure the offset group at fair value in
the statement of financial position at the end of each reporting
period.
 The exception does not relate to presentation.
 Ind AS 8 Accounting Policies, Changes in Accounting Estimates and Errors
must be applied when using the offsetting exception
32
Portfolio Exception: Exposure to Market
Risk
When using the offsetting exception:
 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
 Ensure that the market risk (or risks) within the offset group are
substantially the same:
 Any basis risk resulting from the market risk parameters not being
identical are taken into account in the fair value measurement of the
financial assets / liabilities within the offset group
 Similarly, the duration of the entity’s exposure to a particular market
risk (or risks) arising from the financial assets and financial liabilities
of the offset group must be substantially the same.
33
Portfolio Exception: Exposure to Credit
Risk
 When using the offsetting exception entity must include the
effect of the entity’s net exposure to the credit risk of that
counterparty’s net exposure to the credit risk of the entity in
the FV measurement when market participants would take
into account any existing arrangements that mitigate credit
risk exposure in the event of default.
 FV is required to reflect market participants’ expectations
about the likelihood that such an arrangement would be
legally enforceable in the event of default.
34
Liabilities & Entity’s Equity Instruments
 They must be measured on the assumption that the liability or





35
equity is transferred to a market participant at the measurement
date.
FV should not be adjusted for any restrictions to the liability.
In the absence of an observable market for the transfer of a
liability, preparers should consider the value of the corresponding
asset held by a market participant in measuring FV.
FV may differs (sometimes significantly so) from a measurement
that is based on the assumption of settlement of a liability or
cancellation of an entity’s own equity instrument.
FV of the liability should not incorporate the effect of any
restriction preventing the sale of the corresponding asset.
FV of a liability must factor in non-performance risk
36
Non Performance Risk
 Reporting entities are required to consider nonperformance
risk in the value of a Liability.
 Anything that could influence the likelihood of an obligation
being fulfilled is considered a non-performance risk. This
could include the risk of physically extracting or transporting
an asset or the entity’s own credit risk.
 Nonperformance risk is assumed to be the same before and
after the transfer of the liability.
37
Market
 FV measurement assumes that a transaction to sell an asset or to
transfer a liability takes place in the principal market (or the
most advantageous market in the absence of the principal
market).
Principal Market
Most advantageous
market
Hypothetical
Market
38
• Market with the greatest volume and level of activity
for the asset or liability
• market that maximizes the amount that would be
received to sell the asset or minimizes the amount that
would be paid to transfer the liability, after considering
transaction and transport costs.
• If there are no observable/active markets entity
must develop a hypothetical market based on the
assumptions of potential market participants
Principal/Most Advantageous Market
 Ind AS 113 does not permit the use of a price in the most advantageous market if a





39
principal market price is available.[see Illustration A]
It is not necessary to perform an exhaustive search of all possible markets to identify
the principal market or the most advantageous market. All information that is
reasonably available should be considered and the basis for conclusions should be
documented.
There is a presumption that the market in which the entity normally transacts is the
principal or most advantageous market unless there is evidence to the contrary.
Where entity transacts in various markets it should document which particular
market price is used and process followed to determine the appropriate market.
Different entities can have different principal markets, as the access of an entity to
some market can be restricted.[See Illustration B].
Even different operating units of same entity can have different primary market
depending the access of unit holding the asset/liability. [see Illustration C]
Illustration A
 Suppose a Entity A, a producer of medicine X had market
both in India and US. Price for the medicine is higher in US
market than in India. However, government restriction
allows only 25% of the output to be exported.
 Here, though the most advantageous market is the export
market, as it gives the higher benefits to the producers, the
domestic market is the principal market as it can handle all of
the volume that producers have to sell.
40
Illustration B
 A dealer enters into a interest rate swap with a retail
customer. Here, from the perspective of the dealer, the
principal market for the swap is the dealer market; however,
the principal market for the retail customer is the retail
market because the customer does not have access to the
dealer market.
41
Illustration C
 Suppose, an entity’s operating units located in India,
Singapore and US each hold investments in a particular debt
and equity securities.
 However, the FV measurements reported by each of the
operating units may differ at times due to differences in the
markets to which they have access and the level of activity for
the asset in each market. Ind As 113 requires that each
reporting unit consider the facts and circumstances
appropriate to its valuation of the asset or liability being
valued and follow the framework of the FV standards,
independent of other reporting units.
42
Market Participants Assumptions
 Entity to use assumptions a market participants, acting in the
best economic interest would use while pricing. Therefore,
entity must exclude any entity-specific factors that might
impact the price.
 Market participants are defined as having the following
characteristics:




43
Independent of each other (i.e. unrelated parties).
Knowledgable and using all available information.
Able of entering into the transaction.
Willing to enter into the transaction (i.e. not a forced
transaction).
Changes in Valuation Technique
 Valuation techniques should be applied consistently from one
period to the next.
 Change can be made but only if the change results in a
measurement that is equally or more representative of FV .
 Any such change, where justified, is considered to be a
change in estimate.
44
Observable Inputs
 Observable inputs are publicly available information about
actual events or transactions. Such inputs include those developed
using market data.
 Examples:
 Securities traded on stock exchanges.
 Prices for identical or similar assets in markets that are not active
(for example, market data for sales of comparable land and
buildings).
 Quoted prices of future contracts available on commodities
exchanges.
 Available market data for rentals of properties.
 Interest rates and yield curves observable at commonly quoted
intervals.
45
Unobservable Inputs
 Unobservable inputs are inputs for which there is no market data
available. They are developed using the best information available about
the assumptions that market participants would use when pricing the
asset or liability. They reflect the entity’s own view on the assumptions
that market participants would use.
 Examples:
 Internal forecast of cash flows from intangible assets.
 Internal historical data used to calculate counterparty’s probability of
default.
 Adjustments to current prices for similar properties (for example, physical
conditions and location).
 Estimates of growth expectations and profitability when calculating goodwill
impairment test.
 Profit margin expectations.
46
Level 1 Input
 A quoted price in an active market provides the most reliable
evidence of FV and shall be used without adjustment to
measure FV Except for ‘Portfolio Exemption’ discussed later.
 The emphasis within Level 1 is on determining:
 the principal market/ the most advantageous market for the
asset or liability; and
 whether the entity can enter into a transaction for the asset or
liability at the price in that market at the measurement date.
47
Level 1 Inputs
 In practical terms, the list of instruments that likely qualify as Level 1 FV
measurements is fairly narrow. It includes the following:
 Listed equity securities traded in active, deep markets (for example, BSE.









48
NSE, etc.)
Treasury bills
Exchange-traded futures and options
Open-ended mutual funds with published daily NAV at which investors can
freely subscribe to or redeem from the fund
Closed-ended registered mutual funds (for example, exchange-traded funds)
traded on active markets
India Pepper & Spice Trade Association.
Multi Commodity Exchange of India Ltd
Cotton Association of India
National Commodity & Derivatives Exchange Ltd
Spices and Oilseeds Exchange Ltd.
Post-market close events
 Sometimes events ( some announcements, etc) may occur
after the close of a market but before the end of the
measurement date. Thus, a quoted market price may not be
representative of FV on the measurement date.
 Reporting entities should establish and consistently apply a
policy for identifying and incorporating events that may
affect FV measurements. In addition, if a reporting entity
adjusts the quoted price, the resulting measurement will not
be classified in Level 1, but will be a lower-level
measurement.
49
Large number of similar assets and
liabilities
 For practical expedient of FV measurement of a large
number of similar assets or liabilities (e.g., debt securities)
for which quoted prices in active markets are available, but
not readily accessible, an entity may measure FV by using an
alternative pricing method (e.g., matrix pricing) instead of
obtaining quoted prices for each individual security.
 Here, entity must demonstrates that the method replicates
actual prices.
 However, the resulting FV measurement will be Level 2, not
Level 1 as it would have been had the quoted prices been
used.
50
Level 2 inputs
 Examples of Level 2 inputs include:
 A dealer quote for a non-liquid security, provided the dealer is
standing ready and able to transact
 Posted or published clearing prices, if corroborated with
market transactions
 Vendor or broker provided indicative prices, if due diligence by
the reporting entity indicates such prices were developed using
observable market data
 Examples of instruments that are typically Level 2
measurements include:
 Short-term cash instruments
 Certain derivative products
51
Adjustments to Level 2
 Adjustments to Level 2 inputs should include factors such as
the condition and/or location of the asset/liability on the
measurement date.
 Significant adjustments may place the measurement in Level
3 in the FV hierarchy.
 Level 2 input needs to be observable for substantially the full
term of an asset or liability that has a contractual term.
However, certain inputs derived through extrapolation or
interpolation may be corroborated by observable market data
(e.g., interpolating three-year yields using observable oneand five-year interest rate yields) and would be considered a
Level 2 input.
52
Illustration
 Suppose there are quoted forward prices available for 15-day
and 60-day Foreign exchange contracts, and Entity A is
valuing a 30-day contract. On the other hand, there is Entity
B which has to value forward foreign exchange contract with
2 years term and rates are quoted only for 1 year.
 Here, Entity A can determine price through simple
interpolation and the resulting measurement is a Level 2
valuation.
 However, In case of Entity B, any extrapolated amount would
be considered a Level 3 valuation if there are no other
observable market information to corroborate the rates in
the second year.
53
Level 3 Inputs
 The valuation objective remains same i.e. to determine Exit





54
Price from perspective of market participant who hold
the instrument.
Thus, unobservable inputs should reflect the assumptions that
market participants would use when pricing the asset or liability.
Level 3 include information derived through extrapolation or
interpolation
that cannot be directly corroborated by observable market data.
Though , an entity need not undertake exhaustive efforts to obtain
information about market participant assumptions, it should take
into account all information that is reasonably available.
Where entity uses its own data to develop Level 3 inputs, it should
adjust that data if information is reasonably available that indicates
market participants would use different assumptions.
Level 3- Examples
 Examples of inputs that are unobservable and considered Level 3 include
the following:
 Inputs obtained from broker quotes that are indicative (i.e., not firm and
able to be transacted upon) or not corroborated with market transactions
 Management assumptions that cannot be corroborated with observable
market data
 Vendor-provided prices, not corroborated by market transactions
 Common examples of assets or liabilities typically valued using Level 3
measurements include:
 Complex instruments, such as longer-dated interest rate and currency swaps
and structured derivatives
 Fixed income asset-backed securities, depending on the specific asset owned
(i.e., the specific tranche), the nature of the valuation model used, and
whether the inputs are observable
 Impairment testing of goodwill or indefinite-lived intangible assets
 Contingent consideration
55
Disclosures [Para 91-99]
 An entity shall disclose information that helps users of its financial
statements assess both of the following:
 for assets and liabilities that are measured at FV on a recurring or
non-recurring basis in the B/S after initial recognition, the
valuation techniques and inputs used to develop those measurements.
 for recurring FV measurements using significant unobservable inputs
(Level 3), the effect of the measurements on profit or loss or other
comprehensive income for the period
 For above, an entity shall consider all the following:




56
the level of detail necessary to satisfy the disclosure requirements;
how much emphasis to place on each of the various requirements;
how much aggregation or disaggregation to undertake; and
whether users of financial statements need additional information
to evaluate the quantitative information disclosed.
Recurring Vs. Non recurring
 IFRS 13 requires specific disclosures based on FV
measurement is recurring (RFVM) or non-recurring
(NRFVM).
 RFVM and NRFVM are not defined in Ind AS 113.
 However, in general:
 RFVM: FV measurement is required at reporting date by other
IFRSs (e.g. investment property, biological assets etc.)
 NRFVM: FV measurement is triggered by particular
events/circumstances (e.g. assets held for sale under Ind AS 105
etc.)
57
Minimum Disclosure in B/S
For each class of A/L measured at FV after initial recognition:
 for recurring and non-recurring FV measurements, the FV measurement at
the end of the reporting period, and for non-recurring FV measurements,
the reasons for the measurement.
 for recurring and non-recurring FV measurements, the level of the fair value
hierarchy within which the FV measurements are categorised in their
entirety (Level 1, 2 or 3).
 For recurring FV measurements, the amounts of any transfers between
Level 1 and Level 2 of the FV hierarchy, the reasons for those transfers and
the entity's policy for determining when transfers between levels are deemed
to have occurred . Transfers into each level shall be disclosed and discussed
separately from transfers out of each level.
 for recurring and non-recurring FV measurements categorised within Level
2 and Level 3 of the FV hierarchy, a description of the valuation technique(s)
and the inputs used in the FV measurement.
58
Minimum disclosure in B/S
 If there has been a change in valuation technique, the entity shall




59
disclose that change and the reason(s) for making it.
If the highest and best use of a non-financial asset differs from its
current use, the fact and the reason thereof.
If portfolio exception used, the fact to be disclosed as accounting
policy.
For a liability measured at FV and issued with an inseparable thirdparty credit enhancement, the existence of that credit enhancement
and whether it is reflected in the FV measurement of the liability,
should be disclosed
All the quantitative disclosures required to be presented in tabular
format unless another format is more appropriate.
Additional Disclosures for Level 3
 Quantitative information about the significant unobservable
inputs
 a description of the valuation processes used
 for recurring FV measurement, a reconciliation from the
opening balances to the closing balances disclosing separately
changes during the period attributable to :
 total gains or losses recognised in P/L, and the line item(s) inP/L
in which they are recognised. If attributable to change in unreialised
gains or losses amounts to be disclosed separately.
 total gains or losses recognised in other comprehensive income, and
the line item(s) which they are recognised.
60
Additional Disclosures for Level 3
 purchases, sales, issues and settlements
 the amounts of any transfers into or out of Level 3, the reasons for
those transfers and the entity's policy for determining when
transfers between levels are deemed to have occurred.
 for recurring FV measurement
 a narrative description of the sensitivity of the FV measurement to
changes in unobservable inputs if a change in those inputs to a
different amount might result in a significantly higher or lower FV
measurement.
 for financial A/L, if changing one or more of the unobservable
inputs to reflect reasonably possible alternative assumptions would
change FV significantly, the fact and the effect of those changes
61
62
63
64
65
66
67
THANKS
68