Estimating fair value: market price or model and inputs

Learning objectives

• Explain the usual inputs to an option pricing model and the judgement they involve (never a value prescribed by the Standard).L3

Normative references

• IFRS 2 §47When the fair value of goods or services received is measured indirectly by reference to the equity instruments granted, the entity discloses at least: for options granted, their weighted average fair value and how it was measured (option pricing model and inputs, including share price, exercise price, expected volatility, option life, expected dividends, risk-free interest rate, early exercise; how expected volatility was determined; other features such as a market condition); for other equity instruments, their number, weighted average fair value and how it was measured; for modified arrangements, an explanation, the incremental fair value and how it was measured.

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

1 question

• To measure the fair value of options granted to employees using a valuation model, which of these statements is correct?L3