IFRS 13 (Part – 2) Technical Issues

This is in continuation to my previous blog. In this blog I will be discussing about IFRS 13 in much more details. This blog covers some technical questions raised during recent webinar organised by IASB on 23^rd May, 2011. Some technical issues:

• When we talk about principal market does it means the market in which the entity normally trades or do we consider it to be market where market normally trades. As far as this question is concerned principal market means a market where the market often trades and not merely the entity.
• Distress market prices and inputs from distress markets are not to be considered for fair value calculation.
• The most important issue that needs attention is, IFRS 13 requires net risk position to be stated but IAS 32 requires gross presentation thus these two standards sound confusing, more clarification is required on this issue.
• Fair value determination in case of 1 Day transactions which are peculiar in case of banks still remains unaddressed, but IASB is working on this and shortly guidance on this issue will be made available.
• Another important point addressed is about cost as best estimate of fair value. Cost can no longer be the best estimate of fair value. Even if it is difficult to calculate fair value, using level 3 inputs fair value needs to be calculated.