CERTYNEX IFRS ACADEMY

For the fair value of its warranty provision, Brasselle uses the amount it would have to pay the customer to extinguish the obligation, on the grounds that "the liability thereby disappears from our books". What is the error?

The nominal value of the provision should be used with no adjustment.

The standard assumes a transfer to a third party, the liability remaining in place, not a settlement with the counterparty.

The customer should have been the reference market participant.

A warranty provision does not fall within the scope of fair value measurement, for lack of a market in which it trades.