All,
I have a question and need reconfirmation. If there is a long-term loan valued at amortized cost would that be considered a level 3 in the fair value hierarchy in the FS?
Thank you
Fair Value of Financial Instrument
Re: Fair Value of Financial Instrument
If it's amortised cost then it's not held at fair value, unless I misunderstood?
Re: Fair Value of Financial Instrument
True, but you still have to disclose it from IFRS 13 point of view.
Re: Fair Value of Financial Instrument
Thanks but I thought level 2 are for instruments with a quoted price. However, this is a loan with fixed payments and is non-interest bearing....
Re: Fair Value of Financial Instrument
Leo, IFRS 13 is for assets carried at fair value. Where does it need any disclosure about a SPPI loan asset which is carried at amortised cost?
Re: Fair Value of Financial Instrument
Thank you very much Leo.
Re: Fair Value of Financial Instrument
Even in those paras of IFRS 13 I can't see the requirement except when there was a non-recurring fair value determination like in a combination. Happy to be corrected that this is required for a standard loan which is carried at A.c.
Re: Fair Value of Financial Instrument
If you have a few minutes, you can compare this note to 21.4 for the borrowings. When you add all the floating rate loans al together, you'll see that the numbers are the same than in this note.
When you add all the fixed rate loan al together, you'll see that there is a slight difference with the numbers in this note.
From my understanding, floating rates, because it's valued at Euribor or Libor which varies in function of the market, the value is near it's fair value.
For the fixed rates loans, they are initially valued at fair value, then subsequently accounted by using the amortised cost method. For the purpose of this exercise, groups are asked to re-assess those loans with market interest rate.
When you add all the fixed rate loan al together, you'll see that there is a slight difference with the numbers in this note.
From my understanding, floating rates, because it's valued at Euribor or Libor which varies in function of the market, the value is near it's fair value.
For the fixed rates loans, they are initially valued at fair value, then subsequently accounted by using the amortised cost method. For the purpose of this exercise, groups are asked to re-assess those loans with market interest rate.
Re: Fair Value of Financial Instrument
It's true that fair value should be disclosed also for assets/liabilities carried at amortised cost. This is a requirement set out in IFRS 7.25. It's even required in interim financial statements!
For floating rate instruments issuers often say that 'the carrying amount is a reasonable approximation of fair value' as per IFRS 7.29(a)
For floating rate instruments issuers often say that 'the carrying amount is a reasonable approximation of fair value' as per IFRS 7.29(a)