Fair value measurement

Date recorded:

Fair Value measurement – Unit of account (Agenda Paper 6)

The IASB continued with its analysis of the ED Measuring Quoted Investments in Subsidiaries, Joint Ventures and Associates at Fair Value (Proposed amendments to IFRS 10, IFRS 12, IAS 27, IAS 28 and IAS 36 and Illustrative Examples for IFRS 13).

The Board decided in July 2015 to conduct further research, given the concerns received from the comment letters on the ED. 

Research on the proposed measurements in the Exposure Draft (Agenda Papers 6A and 6B)

The Board was presented with research activities conducted by the staff to assess how many entities would be potentially affected by the amendments. The staff also conducted outreach activities with valuation specialists, accounting firms, securities regulators, ASAF and FASB staff. Agenda paper 6A presented a summary of the research performed and agenda paper 6B presented a detailed analysis. The Board was not asked to make any decision and would be presented with further research with preparers, users and academic reviews at future meetings.

The staff concluded that the number of entities affected is very limited. The outreach highlighted that respondents were concerned that measuring the fair value of a quoted investment by applying P x Q did not result in a relevant measurement because it did not reflect the fair value of the investment as a whole. The staff also noted that the valuation specialist commonly measured the fair value of quoted investment by applying a valuation technique such as discounted cash flow.


The Board supported the approach the staff had taken to collect more feedback on the impact of measuring the fair value of a block of assets as P x Q (e.g. a block of shares as the market price multiplied by the number of shares). There was also agreement that the Board needs to resolve this issue, although the discussion did not provide a clear direction as to what the potential solution could be.

The Board acknowledged the existing conflict between the requirement to measure a group of assets or liabilities based on their unit of account (considering that in the case of sales of large block of shares there could be discounts or premiums) with the IFRS 13 principle that required entities to maximise the use of observable inputs (level 1 without adjustment). There was agreement that moving away from the IFRS 13 principle would be too risky without conducting a broader analysis of IFRS 13 (for example by the post implementation review). 

As regards the research performed by the staff, most Board members indicated that the feedback was in accordance with their expectations. It was also mentioned that even though the population potentially affected was not very large, in most cases it could be material.  Also, the staff confirmed that their research did not include a detail analysis as to whether entities were making adjustments to the P x Q calculation, what those adjustments were or whether entities disclosed supplementary information or gave non-GAAP measures to reflect any adjustment they would have made. The staff indicated that they would perform further research on a sample basis to understand the situation further.

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