Calibration

Learning objectives

• Calculate the calibration adjustment that makes the initial result of the valuation technique equal the transaction price.L4

Normative references

• IFRS 13 §64If the transaction price is fair value at initial recognition and a valuation technique that uses unobservable inputs is used subsequently, the technique is calibrated so that its initial result equals the transaction price.

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

3 questions

• At the acquisition date, Brelinde pays {transaction_price} for an instrument, a price it regards (case data) as its fair value at initial recognition. It will then measure the instrument using a model with unobservable inputs, which gives {initial_technique_result} at that date. Compute the calibration adjustment that makes the model's initial result equal to the transaction price.L4
• The transaction price of an instrument is its fair value at initial recognition, and the entity will subsequently use a technique with unobservable inputs. Why does it calibrate that technique?L4
• A model with unobservable inputs gives 4,100,000 at the acquisition date of an instrument paid 4,300,000, a price regarded as its initial fair value (case data). Which of these analyses of calibration is wrong?L4