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AASB 13 - Fair Value Measurement - September 2011
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Defined Terms
This appendix is an integral part of AASB 13.
| active market | A market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. |
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| cost approach | A valuation technique that reflects the amount that would be required currently to replace the service capacity of an asset (often referred to as current replacement cost). |
| entry price | The price paid to acquire an asset or received to assume a liability in an exchange transaction. |
| exit price | The price that would be received to sell an asset or paid to transfer a liability. |
| expected cash flow | The probability-weighted average (ie mean of the distribution) of possible future cash flows. |
| fair value | The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. |
| highest and best use | The use of a non-financial asset by market participants that would maximise the value of the asset or the group of assets and liabilities (eg a business) within which the asset would be used. |
| income approach | Valuation techniques that convert future amounts (eg cash flows or income and expenses) to a single current (ie discounted) amount. The fair valuemeasurement is determined on the basis of the value indicated by current market expectations about those future amounts. |
| inputs | The assumptions that market participants would use when pricing the asset or liability, including assumptions about risk, such as the following:(a) the risk inherent in a particular valuation technique used to measure fair value (such as a pricing model); and(b) the risk inherent in the inputs to the valuation technique.Inputs may be observable or unobservable. |
| Level 1 inputs | Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. |
| Level 2 inputs | Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. |
| Level 3 inputs | Unobservable inputs for the asset or liability. |