Fair value is ... Price and value

The concept of "fair market value" is known to domestic accountants from international theory and practice. The Russian accounting regulations use a similar term. In the PBU there is the concept of "current market value." However, the norms do not contain a clear definition. Moreover, there are no recommendations for its evaluation. In this matter, the foreign theory and practice of accounting far outstrips the domestic one. . In IFRS, the standard IFRS 13 was recently introduced. It defines the fair value of the asset . Let's consider some provisions of the standard.

Definition

Fair value is the amount of the amount that can be obtained when selling the OS or pay for the transfer of obligations in the ordinary transactions between the participants of the turnover at the measurement date. It is worth mentioning that earlier in the standard there was another definition. It can not be said that the new section completely changed it. However, in the IFRS 13 concept is significantly expanded and refined. – сумма покупки или продажи. From the previous definition it was not clearly understood what value is the amount of purchase or sale. сумма выхода (продажи), при этом в МСФО она была показателем обмена – покупки (входа). Questions arose in the preparation of IFRS 3. During the process it became clear that under US GAAP, fair value is the amount of the yield (sale), while in IFRS it was an indicator of exchange - purchase (entry). Another obscurity was associated with the date on which the measurement is carried out.

Exit Price

сумма выхода. According to IFRS 13, fair value is the yield. That is, it is an indicator of demand, not supply. Exit price - the amount that the seller can get, and not the one by which he would like to sell something. – разные показатели. The price and cost are different. And the latter is of practical importance. A similar rule applies to the obligation. в данном случае? What is the cost in this case? It is the amount that creditors expect to receive for repayment, rather than the amount that the debtor would like to pay for getting rid of the obligation. могут отличаться. Within the framework of active turnover, the price and cost may differ. This is especially true for transactions with stock exchanges and other financial instruments.

Nuances

сумма, которая определяется ожиданиями будущих потоков денег (оттока и притока), связанных с имуществом или обязательствами с точки зрения субъектов-участников оборота, владеющих ими на дату измерения. Fair value is the amount that is determined by the expectations of future cash flows (outflow and inflow) related to property or liabilities from the point of view of the participants in the turnover that own them at the measurement date. You can obtain finance in two ways. An asset or obligation can be used or sold. Even if the participant will exploit the property, then the exit price will be determined by the expected flow from sale to its subjects, which after the acquisition will receive money from the application. In other words, any person acquiring an asset will only pay for the benefits that he expects to receive later. Exit price, therefore, always appears as a relevant definition of fair value. It does not matter whether the enterprise is going to use the property or realize it.

SFO 16

In this standard it is allowed to use 2 OS accounting models: at cost and operating cost. The first is considered traditional. It is used in accounting for the OS in all national systems. The second model involves the reflection of objects at a revalued cost. Appropriate procedures should be implemented with such frequency, which is enough to ensure that at any time the book value of the OS is not very different from the exit price. This model has a rationale. In developed countries, the annual inflation rate is insignificant. In this regard, its impact on the value of assets can be neglected. However, for an OS with a long period of use, the inflationary effect will accumulate over time. Reflection of these objects at cost will lead to the fact that there will be a lot of "heterogeneous indicators" in the balance sheet. Regular recalculation of the OS will lead to their st -st to one denominator. It is believed that this will give greater credibility to the reflection of objects in the reporting.

IAS 38

In these standards, two models of accounting are also allowed. However, unlike the OS, there is one condition under which fair value can be applied to the NMA . наличие активного оборота. This is the presence of active turnover. It is determined by the following. The value of NMA in an active market will be fair - the one that is used to reflect in the accounting. This means recognizing unrealized losses or profits from decreasing / increasing the value of property. They are reflected in other general income. These amounts are not included in the statement of losses and profits. When disposals of revalued assets, the entire revaluation accumulated thereon is written off against retained earnings.

IAS 41

особого типа – биологических. This standard defines recognition and valuation of assets of a particular type - biological. Their peculiarity is the process of transformation - growth, reproduction, degeneration. These phenomena cause quantitative or qualitative changes. The standard prescribes keeping records of biological assets and agricultural products at fair value, from which the cost of sales at the date of harvest is deducted. Thus, the results of transformation are reflected from the moment of their appearance. In accordance with the traditional model, changes in such assets are not shown when they occurred, but in their implementation. This period for some types of products can last up to several years or dozens of years. If the revenue is acknowledged at the moment of completion of the biotransformation, and expenses arise during the whole period of its life evenly, the principle of correlation of income and expenses will be violated. Consequently, the financial result is also distorted. The IASB notes that biotransformation is a unique and fundamental feature of bioactive assets. In this regard, the reporting should be reflected as soon as it occurs. позволит пользователям наилучшим образом проанализировать финансовые итоги и будущие перспективы предприятия, занятого в сельскохозяйственном производстве. Only in this case, the valuation of assets will allow users to better analyze the financial results and future prospects of the enterprise engaged in agricultural production.

Investment property

She focuses on the IAS 40. This property is an object that is owned to receive lease payments or capital gains (not for sale or use for production purposes). The standard specifies that such property should be accounted for at fair value for each reporting date, with changes in the value for the period reported to the loss and profit account. It should be taken into account that in a number of states, the real estate turnover is not very active. Accordingly, the valuation of assets is significantly hampered. For such cases, the Board provides the opportunity to select the accounting model, as in IAS 16.

Exceptions

IFRS 13 is used in cases where other standards allow or require an estimate of fair value. However, there are exceptions. They include:

1. Payments that are based on shares, according to IFRS 2.
2. Lease agreements.
3. Measures that are similar to fair value, but are not it.

The latter include, in particular, the net realizable value in accordance with IFRS 2, as well as the value of use, in accordance with standard 36. Net realizable value is the amount that the enterprise expects to receive from the sale of its inventory in the ordinary course of business.