AASB 13 - Fair Value Measurement - August 2015

What this is: AASB 13 is an accounting standard that tells Australian businesses how to measure and report "fair value" in their financial statements.

What "fair value" means: It's the price you would get if you sold an asset (like property, equipment, or investments) or paid to transfer a liability (like a debt) in an orderly transaction between market participants at the measurement date. Think of it as "what something is really worth in the current market" rather than what you originally paid for it.

Who it affects:

• Public companies and large proprietary companies that must follow Australian Accounting Standards
• Auditors who check these financial statements
• Investors and regulators who rely on consistent, comparable financial information

What it does:

• Sets out a single framework for measuring fair value across all accounting standards
• Requires companies to use market-based evidence where possible (not just internal estimates)
• Mandates detailed disclosures so users can understand how fair values were determined and how uncertain those measurements are
• Establishes a "fair value hierarchy" that ranks inputs from most reliable (Level 1: quoted prices in active markets) to least reliable (Level 3: unobservable internal estimates)