Fair value

Topics: Fair value, Real estate appraisal, Balance sheet Pages: 2 (1641 words) Published: October 26, 2014
Fair value

How your property valuations can
be fully compliant with HKFRS 13
Property valuations are commonly required for financial reporting purposes. Gary Stevenson explains how they need to meet the
upcoming standard on fair value measurement

H

KFRS 13 Fair Value
Measurement provides
a single comprehensive
source of guidance on
how fair value is measured for financial
reporting purposes. The standard is applied
prospectively for annual periods beginning
on or after 1 January 2013 and earlier
application is permitted.
Property valuations are commonly
required for financial reporting purposes, for
example, for investment property, property
acquired through a business combination
or property being tested for impairment.
Entities often use external valuers to value
their property interests. Nonetheless,
management is still responsible for the
fair value measurements included in the
financial statements. They therefore need
to assess whether the valuation techniques
and assumptions used by external valuers
comply with HKFRS 13. This will require an
understanding of the main requirements of
the standard relevant to property valuations.
Definition of fair value under HKFRS 13 and
International Valuation Standards
Fair value under HKFRS 13 is a different
concept to fair value as defined in
International Valuation Standards.
Rather, the concept of market value as
defined in IVS will generally meet the
fair value measurement requirement
under HKFRS 13 subject to certain specific
assumptions which are required by the
standard. Management should be aware
of this difference in concepts when
communicating with external valuers in
46

December 2012

order to ensure that property valuations are
The highest and best use of the property
suitable for financial reporting purposes.
should be physically possible, legally
permissible and financially feasible. The use
Which characteristics of the property
of a property does...
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