Disclosures about Fair ValuesDisclosures about Fair Values

Disclosures about Fair Values

64 The auditor shall evaluate whether the disclosures about fair values made by the entity are in accordance with its applicable financial reporting framework.

65 Disclosure of fair value information is an important aspect of a financial report in many financial reporting frameworks. Often, fair value disclosure is required because of the relevance to users in the evaluation of an entity’s performance and financial position. In addition to the fair value information required by the applicable financial reporting framework, some entities voluntarily disclose additional fair value information in the notes to the financial report.

66 When auditing fair value measurements and related disclosures included in the notes to the financial statements, whether required by the applicable financial reporting framework or disclosed voluntarily, the auditor ordinarily performs essentially the same types of audit procedures as those employed in auditing a fair value measurement recognised in the financial statements. The auditor ordinarily obtains sufficient appropriate audit evidence that the valuation principles are appropriate under the entity’s applicable financial reporting framework, are being consistently applied, and the method of estimation and significant assumptions used are properly disclosed in accordance with the entity’s applicable financial reporting framework. The auditor also considers whether voluntary information may be inappropriate in the context of the financial report. For example, management may disclose a current sales value for an asset without mentioning that significant restrictions under contractual arrangements preclude the sale in the immediate future.

67 Under paragraph 64 of this Auditing Standard, the auditor needs to evaluate whether the entity has made appropriate disclosures about fair value information as called for by its applicable financial reporting framework. If an item contains a high degree of measurement uncertainty, the auditor assesses whether the disclosures are sufficient to inform users of such uncertainty. For example, the auditor might evaluate whether disclosures about a range of amounts, and the assumptions used in determining the range, within which the fair value is reasonably believed to lie is appropriate under the entity’s applicable financial reporting framework, when management considers a single amount presentation not appropriate. Where applicable, the auditor also considers whether the entity has complied with the accounting and disclosure requirements relating to changes in the valuation method used to determine fair value measurements.

68 When disclosure of fair value information under the applicable financial reporting framework is omitted because it is not practicable to determine fair value with sufficient reliability, the auditor shall assess the adequacy of disclosures required in these circumstances.