Reference no: EM133186362

Question - Case Study - IFRS 13, was effective from January 1, 2013 that defines about the fair value, it set out a single framework for measuring the fair value and also requires for disclosures about the fair value measurement (IFRS). IFRS 13 does not concentrate as when assets, liability or an equity instrument is being measured at its fair value. Instead, the measurement and the requirements of disclosure apply when the other IFRS permits or requires the items to be measured at its fair value (IFRS). According to this standard fair value is based on the exit price notion and makes use of fair value hierarchy and this results in market based instead of entity specific measurement (IFRS).

The fair value definition as per IFRS 9 is the amount for which the assets can be exchanged or any liability can be settled, between the knowledgeable, willing parties in the length of transaction. According to IFRS 13, the fair value is the price that will be received for selling an asset or paid for transferring a liability in orderly transaction between the market participants at the date of measurement (Deloitte, 2013, p. 1) . In previous IFRS, company were not required to update their liabilities at their fair value, but in case of IFRS 13 one has to disclose even derivative at its market value. According IFRS13, own credit risk will not be included in measuring the fair value of liability. IFRS13 provides for guidance in measuring both financial and non-financial assets together. IFRS 13 uses IFRS7 type in the hierarchy of disclosure which was not followed in the previous measurement. IFRS13 clearly distinguishes the credit risk unlike of previous fair value measurement. The additional disclosure requirements are for those in level 3 hierarchies, they should provide for quantitative information about the observable inputs that e used in fair value measurement. A narrative description about the sensitivity of the fair value should be provided which will result in differing values (Deloitte, 2013, pp. 4-6).

Disclosure requirements must be based on active market values, if in case the assets or liabilities are identical without market price, then similar values can be used (ICAEW). If in case of unobservable inputs developed by the entity, then using the measurement date the values are disclosed (IFRS).The challenges are in determining the fair value of the liability which has a credit risk associated with it. This brings in more difficulty in determining the value of a derivative instrument (Deloitte, 2013, pp. 2-3). It is not easy to determine the value of asset using the active market approach all the time for a company. The alternatives for determining the fair value can be based on similar assets or liabilities transaction; the exit price can be ascertained with the recent sales by other peer group (IFRS). There are cases where it is not easy to determine the active market price, one can make use of DCF (discounted cash flow method) that is the income approach and also adjusted net asset method (IFRS.com, 2012, pp. 61-63).

Required -

From the case study, compare the disclosure notes provided in Nestle, and Royal Bank of Scotland with the disclosure notes of News Corp and CBS Corporation. Explain which disclosure notes are more informative to the stakeholders in the evaluation of the financial statements.

Contrast the difference between the impairment testing of goodwill and the impairment testing requirements for other assets. Examine the purpose of the differences identified in testing impairment of goodwill and other assets.