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Fair Value Measurement

Date recorded:

Scope considerations regarding IFRS 2 Share-based Payment

The Board decided to exclude IFRS 2 from the measurement and disclosure requirements in the final Standard on Fair Value Measurement.

The Board also agreed to provide a note to IFRS 2 that would clarify that requirements of the Fair Value Measurement Standard do not apply to IFRS 2. As one of the Board members noted in some instances the fair value reference in IFRS 2 relates to fair value as proposed in the Standard (such as fair value of goods and services), whereas in other instances (such as equity settled share based payments), fair value is assessed from a different perspective that is inconsistent with the fair value measurement Standard.

Scope considerations regarding IAS 17 Leases

The Board discussed a possible scope exemption for IAS 17 in the context of using the exit price notion or highest and best use (especially in the context of classification of leases and the timing of recognising gains or losses for sale and leaseback transactions). Some Board members were uncomfortable with a blanket scope exemption in this case and would prefer clarification of the fair value measurement standard to ensure that this is a particular application of fair value for non-financial items (that is, using an entry rather than exit price). The Board agreed that the staff should try to clarify the text of the Standard if possible. If such clarification is impractical, leases should be excluded from the scope of the Fair Value Measurement Standard. The Board also noted that amending IAS 17 would be impractical as new guidance for leases is planned to be finalised by June 2011.

Other scoping considerations

Without much discussion the Board agreed not to replace the term 'fair value' in IFRS 3 Business Combinations when referring to the measure for reacquired rights (as an exception to the measurement principle in IFRS 3).

The Board also decided not describe the measurement of the reimbursement rights in IAS 19 Employee Benefits as the present value of the related obligation as a practical expedient for determining fair value.

The Board discussed the potential scope exemption in IAS 39 for measuring financial liabilities with a demand feature (IAS 39.49). Most Board members agreed that the conclusion from IAS 39 should be confirmed and guidance in IAS 39.49 is 'deemed to be fair value for the purposes of liabilities with demand features'.

One Board member asked the staff how this would influence the convergence with the FASB. The staff responded that FASB is considering to change the guidance for liabilities with demand feature (to remove the demand deposit floor and measure the intangible), in which case there would be differences between IASB and the FASB guidance. Most IASB members noted that the final guidance should precisely describe what the measurement is and what attributes it includes. The Board agreed to retain the term 'fair value' for measuring financial liabilities with a demand feature.

The Board decided that each of the IFRSs that are excluded from the scope of the Fair Value Measurement Standard should state the reasons for that decision and why the term 'fair value' was nevertheless retained in that Standard.