Accurate Accounting Measurement: Fair Value Measurement Essay

Accurate Accounting Measurement: Fair Value Measurement Essay

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Fair value measurement:
The Standard 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”. This is sometimes referred to as an “exit price”.(AASB13)
IFRS 13, Fair Value Measurement, was adopted by the International Accounting Standard Board on May 12, 2011. IFRS 13 provides guidance for how to perform fair value measurement under IFRS and takes effect on January 1, 2013(IFRS 13). It does not provide guidance as to when fair value should be used(IFRS 13). The guidance is similar to the US GAAP guidance. Fair value means the amount agreed on by parties to put it in simple terms.

Why fair value?
Previously, organisations were using historical cost accounting ,which indicates the value of assets and liabilities at the date or acquisition. But as we discussed before it was not accurate data or one can’t find accurate financial statements on the basis of historical cost. After May 12, 2011 IFRS introduce a fair value measurement (IFRS 13). Which was indicate fair value. Because of this organisation can get accurate numbers in their financial statement.
This essay includes three examples as below.
Business summary:
ARB Corporation Limited (ARP) designs, manufactures, distributes and sells four-wheel drive vehicle accessories and light metal engineering works with manufacturing plants in Victoria, Australia and Rayong, Thailand. ARP has a warehouse and sales centre located in Australia, Thailand and USA, as well as distributers in over 100 countries worldwide
Analysis of Annual report:
According to company’s annual report 2013, the financial report has been prepared under th...

... middle of paper ...

...ngent consideration is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in profit or loss. The carrying values of financial assets and liabilities approximate their fair values due to their relatively short term nature. (cardno limited, 2013)

In conclusion, according to IFRS 13 one can say that fair value measurement is one of the accurate accounting measurements. There is some other measurement is also available but fair value measurement is trust worthy and according to international standards. As this essay include three example which are from different kind of industries like infrastructure and environment services company, investment company and manufacturer. We can say that this in widely used measurement.

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