E2 Fair value and measurement bases

Fair value under IFRS 13 is best described as:

• 1 The cost of buying the asset
• 2 The carrying amount less depreciation
• 3 The price to sell an asset or transfer a liability in an orderly transaction between market participants
• 4 The price in the entity's own best case

Which inputs are Level 1 in the fair value hierarchy?

• 1 Historical costs
• 2 Quoted prices in active markets for identical items
• 3 Observable inputs for similar items
• 4 The entity's own assumptions

A valuation uses the entity's own assumptions because no market data is available. Which level is it?

• 1 Level 2
• 2 Level 1
• 3 Level 3
• 4 It is not fair value

Are transaction costs deducted when measuring fair value?

• 1 No, fair value is not adjusted for transaction costs
• 2 Yes, for liabilities only
• 3 Yes, always
• 4 Only for financial assets

For a non-financial asset, which use does fair value assume?

• 1 The use the owner prefers
• 2 The current use only
• 3 The highest and best use for a market participant
• 4 The cheapest use

Which is an advantage of historical cost?

• 1 It needs no judgement
• 2 It adjusts for inflation
• 3 It is objective and verifiable
• 4 It always reflects current values

In the hierarchy, a fair value measurement uses one Level 3 input that is significant. What is the classification of the whole measurement?

• 1 Level 2
• 2 It depends on the largest input
• 3 Level 3
• 4 Level 1

Which is a disadvantage of current value measurement compared with historical cost?

• 1 It cannot be audited at all
• 2 It ignores market prices
• 3 It can be less reliable and costlier to prepare
• 4 It is not relevant