Background

The International Accounting Standards Board (IASB) conducts a Post-Implementation Review (PIR) of each new International Financial Reporting Standard (IFRS), generally after the standard has been implemented for two years internationally. A PIR is an opportunity for the IASB to assess the effect of the new requirements of an IFRS and amendments thereto on investors, preparers and auditors.

IFRS 13, Fair Value Measurement was originally issued in May 2011 and was applicable internationally to annual periods beginning on or after 1 January 2013. It provides a single IFRS framework for measuring fair values and requires disclosures about fair value measurements.

In India, Indian Accounting Standard (Ind AS) 113, Fair Value Measurement, which is converged with IFRS 13, was notified by the Ministry of Corporate Affairs (MCA) and is applicable to all companies that are required to or elect to present their financial statements in accordance with Ind AS.

New development

The IASB is conducting the PIR of IFRS 13 in two phases. During the first phase, the IASB held meetings with many stakeholders to identify potentially challenging areas of application. Although the general consensus from stakeholders was that IFRS 13 has worked well and brought significant improvements to financial reporting, a number of areas were flagged in which it was felt that practical improvements could be made to the standard.1 Since IFRS 13 has given rise to a number of implementation issues, IASB has issued a Request For Information (RFI) on this standard. The RFI launches the second phase of the PIR.

The RFI aims to assess whether:

Main areas of focus

Based on the feedback received in the first phase of the PIR, the RFI is now seeking responses to a number of questions including the following:

Area of focus	Questions
Disclosures about fair value measurements- main focus on Level 3 disclosures	How useful are the disclosures? Which factors affect the usefulness – e.g. generic disclosures or disclosures for aggregated groups of assets and/or liabilities? Which disclosures are the most costly to prepare Would other disclosures be useful?
Prioritising Level 1 inputs (P*Q) or the unit of account – measuring quoted investments in subsidiaries, joint ventures and associates at fair value	How often do issues arise in this area? Are there material differences between fair value on the basis of P*Q compared to other valuation techniques? Which techniques are used in practice, and why?
Application of the concept of ‘Highest and Best Use’ (HBU) for non-financial assets	Is the assessment of an asset’s HBU challenging, and why? How common is it that an asset’s HBU differs from its current use and what issues arise in such circumstances? Is there diversity in practice?
Application of judgement in specific areas	Is it challenging to assess whether a market is active? Is it challenging to assess whether an input is unobservable and significant to the entire measurement?

(Source: Measuring fair value- Share your experience of IFRS 13, KPMG IFRG Limited’s publication, May 2017)

In addition, the RFI explores the need for further guidance, such as education material, on measuring the fair value of biological assets and unquoted equity instruments.

Our Comments

We urge companies in India to provide feedback based on their experience in implementing IFRS 13/Ind AS 113. This will assist the IASB in determining any necessary improvements to the standard to help in overcoming the challenges associated with its implementation.

¹Source: Measuring fair value- Share your experience of IFRS 13, KPMG IFRG Limited’s publication, May 2017