Non-orderly transactions

Learning objectives

• Assess whether a transaction is orderly and the weight to be placed on its price.L4

Normative references

• IFRS 13 §B43Determining whether a transaction is orderly is more difficult after a significant decrease in activity, but it is not appropriate to conclude that all transactions in that market are not orderly; indicators: inadequate exposure to the market, marketing to a single buyer, a seller in distress or forced to sell, an outlier price; the conclusion is based on the weight of the evidence.
• IFRS 13 §B44Little, if any, weight is placed on the price of a transaction that is not orderly; the price of an orderly transaction is taken into account, with a weight depending on volume, comparability and proximity to the measurement date; without sufficient information, the price is taken into account with less weight; a party to the transaction is presumed to have the relevant information.
• IFRS 13The Standard does not preclude the use of quoted prices provided by third parties (pricing services, brokers) if the entity has determined that they are developed in accordance with IFRS 13.
• IFRS 13After a significant decrease in activity, the entity evaluates whether third-party quoted prices are based on current information reflecting orderly transactions or on a valuation technique reflecting market participant assumptions (including about risk); it places less weight on quotes that do not reflect the result of transactions.
• IFRS 13The nature of a quote (indicative price or binding offer) is taken into account when weighting the evidence, with more weight given to third-party quotes that are binding offers.

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

2 questions

• An entity notes that a recent transaction in an instrument was concluded at a price well below that of the other transactions. How does it treat this information in its measurement?L4
• A valuer justifies their treatment of prices in a market where activity has decreased. Which of their statements is wrong?L4