Techniques and inputs (Levels 2 and 3)

Learning objectives

• Identify the disclosures about the valuation techniques and inputs used for Level 2 and Level 3 measurements and changes in them.L3

Normative references

• IFRS 13 §93Minimum disclosures for each class of assets and liabilities measured at fair value after initial recognition: fair value at the end of the period (and reasons for non-recurring measurements), level of the hierarchy, transfers between Levels 1 and 2 (recurring), valuation techniques and inputs for Levels 2 and 3 with quantitative information about significant unobservable Level 3 inputs, reconciliation of Level 3 balances and unrealised gains or losses (recurring, 93(e) and (f)), description of the Level 3 valuation processes (recurring and non-recurring, 93(g)), sensitivity to unobservable inputs (recurring, 93(h)), difference between highest and best use and current use (93(i)).

Original summaries of the paragraphs (reference register), never a quotation of the standard.

4 questions

• For a recurring measurement classified in Level 2 or Level 3, what must the entity describe in its notes about the measurement method?L3
• Which statements about the disclosures on valuation techniques and inputs are consistent with the standard?L3
• A group's fair value table shows an interest rate swap classified in Level 2, with its fair value, but the notes describe neither the technique nor the inputs used. What is the error?L3
• A fund holds: (1) a share quoted in an active market, measured at its price; (2) a Level 2 interest rate swap; (3) an unlisted Level 3 interest. For which of these items does the entity describe the valuation techniques and the inputs used?L3