IFRS 13: Feedback, Guidance, And The Way Forward

The measurement of fair value, along with any related disclosures, is an important area of focus for accountants, regulators, investors, and shareholders. In order to streamline fair value measurement and disclosure requirements, the International Accounting Standards Board (IASB) developed IFRS 13, which became effective in 2013. However, the quality of fair value disclosures on the financial statements of banking, non-banking, commercial, and service companies is still hotly debated. Several regulators (including the European Securities and Markets Authority [ESMA]) have identified numerous shortcomings, commenting on the adequacy, appropriateness, comparability, and specificity of disclosures provided by various entities. The IASB itself has also conducted an implementation review, with the following notable findings:

The methodologies and assumptions to determine fair values including counterparty risk adjustments are not tailored for the entity. Counterparty risk adjustments are not explained in sufficient detail. The sensitivity analysis included is too general, if not inadequate, considering the range of financial instruments used by the entities. Calibration and adjustments, as applied to market price when market price is not a true reflection of fair values, are not adequately explained in the financial statements. Judgments applied by the entity to determine the unit of account are not disclosed or not disclosed adequately. Next, the IASB invited stakeholders to provide their comments on IFRS 13 implementation...