Application of fair value in the formation of financial performance of companies. Application of fair value in the formation of financial performance of companies Round table "Through the effective management of the company to a more stable economy" Grishkin Svetlana Nikolaevna Professor of the Department "Accounting in commercial organizations »
Regulations on the recognition of international standards financial statements and explanations of international financial statements for application in the territory of the Russian Federation (Decree of the Government of the Russian Federation from N 107) The federal law On the consolidated financial statements of 208-ФЗ from the accounting accounting of 402-FZ from
Fair value (Fair Value) The price that can be obtained when selling an asset (exit price) or has been paid when transferring an obligation during a voluntary basis on the main (or the most profitable) market on the date of the assessment in the current market conditions. IFRS 13 "Evaluation at the fair value" May 12, 2011.
Pros and Cons Improving the transparency of informative information The difficulty information in determining the price of recognition of large losses during the crisis approach to the fair value assessment: for evaluation purposes, it is necessary to determine: a specific assessment of an asset or obligation for non-financial asset - Method of using an asset, intended for the purpose of assessment of the main (or most favorable) market, the relevant method of evaluating the initial data for the assessment methodology on the basis of market member assumptions
IFRS 13: Determines the fair value; establishes in a separate IFRS concept of measuring fair value; and determines the disclosure of information about the estimates at fair value; explains how to evaluate the fair value for the financial statements; Requires estimates at fair value in addition to those who are already required or permitted by other IFRS.
3 approaches to the measurement market approach - an assessment of fair value is made on the basis of data on transaction prices with similar objects; profitable approach - based on the determination of the current value of future income from the operation and / or possible sale of the estimated object; The cost approach is a fair value determined on the basis of the cost of construction / acquisition of an object similar to its utility to the estimated object.
International Standards Estimates in 1981 was formed International Council According to property valuation standards - The International Valuation Standards Council (IVSC) The first edition of international assessment standards was published in 1985. The official translation of the first edition is presented in the ConsultantPlus system
Last edition July 19, 2011 International Evaluation Standards Committee (IVSC) published information on exit new edition International Evaluation Standards (IVSC 2011). International Evaluation Standards 2011 are valid from January 1, 2012. The document in English is represented on the official website - the official translation into Russian does not exist
The fair value in MSO is presented in the standard-application of IVS 300 Valuations for Financial Reporting - "Evaluation for Financial Reporting purposes" The main provisions: the existing thesis is confirmed, which fair value in the context of accounting measurements in general corresponds to the market value in the estimated sense. The meaning of three-level data hierarchies is explained when using assessment approaches enshrined in IFRS 13. The problem of assets aggregation during their accountant measurement is highlighted at fair value.
Fair value in MSO standard leads to a definition of fair value according to IFRS 13: the price that would be obtained when selling an asset or paid when transferring an obligation in the conditions of operation carried out on the organized market, between market participants at the evaluation date.
EPO 1. Evaluation for the purposes of financial statements in the absence of current prices in the active market, the appraiser should consider information from a variety of sources, including: 1. Current pricesobserved in the active market in respect of the property of another type in another state or location (or characterized by other lease conditions or other treaties) - taking into account the introduction of adjustments to the reflection of such differences;
EPO 1. Evaluation for the purposes of Financial Reporting 2. Recent prices for comparable property facilities in less active markets - adjusted to reflect any changes in economic conditions during the transaction dates that were made in these prices;
EPO 1. Evaluation for the purposes of financial statements 3. Designing of discounted cash flows based on reliable estimates of future cash flows, supported by the conditions of any existing rental or other contracts, and, when possible, external certificates, such as current market rental fees on comparable objects Property in the same location and condition - using discount rates that would reflect current market assessments of uncertainty regarding the magnitude and temporary profile of the monetary streams under consideration.
Fair value estimation procedures On the example of fixed assets, the main stages of the procedure for assessing the fair value of fixed assets include: 1) visits to the enterprise and collect information about fixed assets; 2) analysis of the composition and state of fixed assets; 3) analysis of technical and economic indicators of the enterprise; 4) Analysis of the industry market; 5) assessment of the market value of liquid assets; 6) assessment of the cost of substitution minus the wear of specialized assets; 7) a test for economic depreciation (analysis of additional external wear); 8) Control activities, preparation of concluding and necessary statistics.
Lack of an active market monopolization lost competition mechanism instability economy corruption shadow business unresolved assessment mechanism lack of free money High inflationary risks Opacity of transactions Undusting appraisal activities
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Accountant of any domestic company is familiar with the concept of "fair value of IFRS", but only in its other wording - "current market value". Moreover, the clear recommendations for its formation or a specific description of the term does not give any position on accounting. To solve this problem, IFRS 13 "Evaluation of fair value" is specifically entered.
Objectives of IFRS 13.
As a result financial activities Organizations Information regarding its assets can either exist or absent. Therefore, to determine the real market value of assets can be quite difficult. To understand what is the fair value in IFRS, it is necessary to immediately determine the purpose of its use:
- the IFRS 13 standard gives a specific definition of the concept of "fair value assessment";
- the standard is fully described by the methods of defining fair value;
- the standard allows you to provide information on fair value in full, given the possible risks and benefits for all market participants.
What implies the concept of "fair value"
Fair value under IFRS is the real price of assets at the time of sale or the amount paid directly at the time of the transfer of obligations from one market participant to another. In short, the concept of fair value of fixed assets under IFRS makes it possible to eliminate the possibility of fraud from any of the parties to the transaction.
If we talk about IFRS 13 "Evaluation of fair value" briefly, then the standard has been introduced specifically to simplify any transactions in the international market.
Terms of defining fair value
Estimation of fair value in IFRS involves the definition of the main components, namely:
- specific asset or obligation;
- the definition of fair value under IFRS is based on the wishes of the market participants (for example, any restriction on the use or sale of an asset, as well as its condition, which may affect its final cost)
- estimation objects may be a group of assets or a complex of obligations
- the accounting unit is regulated on the basis of IFRS used for the assessment facility.
- the main market (in the absence of such or under insufficient information, it is necessary to determine the most favorable market);
- the default market is used on which the owner of the asset makes most of their transactions.
- under the most favorable market implies the market with the maximum level of activity of the assessment object
- the most favorable market can not be the market, access to which is missing at the time of the transaction
- the use method of using an asset (if it comes to non-financial asset);
- the method of assessing the fair value of assets under IFRS;
- the method of assessing the fair value of financial instruments under IFRS;
- primary indicators (source data) for evaluation.
What gives IFRS 13
Fair value in accordance with IFRS involves compliance with certain conditions that make the process of making a transaction as transparent as possible. So, by default it is believed that:
- parties make a deal on the basis of their own economic interests;
- parties do not have each other obligations capable of influence the fair value of assets or liabilities;
- the owner of the asset or obligation provided full information about the object of the transaction;
- the participants in the transaction will receive economic benefits.
As you can see, the use of IFRS 13 greatly simplifies transactions for all market participants, excluding any possibility of fraud or concealment of information. Of course, to completely describe all the advantages of the transition to IFRS in one article is quite difficult. Pass the test for knowledge of the Fundamentals of IFRS on the course page of our Academy.
The problem of choosing the correct assessment of the assets of the organization at the present stage is very acute. Unfortunately, currently there are still discrepancies between RAP and IFRS and therefore the category "fair value" is very unreasonable and blurred.
Currently, there are various value estimates. The rules for evaluating each of the individual assets and obligations are established by the relevant regulatory acts.
Each valuation in different ways characterizes various accounting objects. However B. modern conditions They do not allow to get demanded by interested users with reliable information about the cost of assets and commitments of the organization at the current time. In this regard, as well as in the fact that economic conditions are characterized by increased dynamicity, the exit may be to apply assessing assets at fair value, which requires a special approach.
The concept of "fair value" for the first time appeared in the early 1990s. In the United States in the generally accepted principles accounting - US GAAP (US GAAP). Currently in American standards financial accounting The official guidance on the definition of fair value for the purposes of accounting and financial statements is SFU (SFAS) No. 157 "Evaluation of fair value", published in September 2006
Initially, fair value was used as a means of revaluation. She changed only the currency of the balance and did not affect the result. The translation of the assets for a permanent assessment at fair value was assumed not only by the constant reassessment of assets, but also associated it with the value financial results. From now on, accounting at fair value began to mean that the change in assessment assessment due to a change in the market automatically means receiving an increase in profit or loss out of connection with its operations similar to exchange differences.
The purpose of the fair value assessment is to provide the user to the financial statements to the most reliable information on the real current value of assets and liabilities. This information is definitely increasing the importance and accuracy of the formable reports. The concept of fair value is the fundamental principle of IFRS.
In modern economic conditions, the use of fair value is caused by the following factors:
- reform and integration of organizations cause changes in the accounting and reporting system;
- expansion of user circle information accounting reporting places new requirements for it;
- modernization of production, the introduction of innovative technologies impose increased requirements for accounting information;
- responsibility to form consolidated financial statements arising in the economy with interconnected organizations.
Under the concept of "fair value", which is presented in IFRS means the amount of funds to which the asset can be exchanged or to fulfill the obligation to take a transaction between well-informed, mutually independent and interested in the parties to the Parties. This means that the buyer wants to make a deal, while he is ready to pay a reasonable (market) value of the asset and does not seek to purchase it in any way and for any price, and the seller does not aim to make a deal, while he wishes to sell an asset on the most profitable Price and not ready to sell an asset in any way and for any price.
However, fair value is usually not the sum that the company received or pay as a result of the compulsory implementation of a transaction, forced liquidation or sales in adverse conditions.
The most reliable confirmation of fair value is the prices (taking into account the worn out) of similar assets in a comparable state located on one territory. An exception may be transactions carried out infrequently (absent at all), and the lack of an alternative estimate of fair value.
Fair cost can be used:
- when applying the accounting model at fair value at the initial recognition of investment property;
- upon subsequent assessment of fixed assets (when applying the accounting method for overvalued cost);
- when determining the recoverable value of assets when checking for possible impairment.
To determine the fair value of assets, according to IFRS, organizations are obliged to conduct an annual test of the indicated impairment assets, while in the RPBU, the reassessment of assets is right, not a duty. In Russian conditions, the best indicator of fair value is the market price. However, still it is impossible to put a sign of equality between the concepts of "fair value" and "market value", and for certain assets, the preferred method for assessing fair value may be an assessment of independent experts.
The unconditional advantage of the fair value estimate is to obtain reliable information about the planned cash flow and forming a base of comparable information.
The advantages of estimating facilities at fair value include an increase in transparency, informativeness and completeness of information. In addition, there are conditions for performing a more reasonable comparative analysis Outcome of the organization's activities - both in dynamics in a number of years and in comparison with other business entities in the same period. However, this method is not deprived of the shortcomings that are most pronounced in the destabilized economic situation - recognition of large losses during the crisis (overestimation of assets with growth), the difficulty of determining the price, non-compliance with the principle of caution.
Summing up the outlined, you can draw the following conclusions:
- evaluation at fair value should be applied only to strictly defined property or operations;
- the procedure for taking into account the facts of economic life at fair value is different for certain types of assets and operations with them;
- ways to assess the object at fair value depend on the type of assets and the possibility of measuring their value;
- objectively develop a unified universal model of calculating fair value is almost impossible.
Thus, the fair value estimate shows the real financial position of the Organization, but cases should be specified methodically when its application is not permissible due to the fact that it does not reflect all the available risks and mislead users.
After all, the correctness of the chosen method of assessing assets and obligations may have a significant impact on the further activities of the enterprise, its viability and liquidity.
Sincerely, a young analyst
It seems that the principles of financial statements are criticized only in difficult times.
Accounting rules at fair value and the role they may have played in a loan crisis, became one of the first items on the agenda of the November meeting G-20. Politicians led the debate all the second half of last year and in October 2008 forced the IFRS Council to weaken the requirements of accounting at fair value.
Politicians began to intervene only after serious lobbying by banks and other financial institutions that shifted some of the faults for failures to the relevant rules enshrined with the IAS39 standard and similar standards of the American SSF.
The main problem of banks is related to what they possess financial instrumentsfor which there was no time an active market (for example, securitiesprovided by mortgages), but in a short time disappeared. This greatly makes it difficult and makes them more and more use models based on few sales prices, probably forced. Another factor is the assets that were originally intended for trading, now have to be preserved, and any cost will depend on the future income in the form of interest.
Pros.Fair value by nature is more transparent. If it is based on market quotes, then, as a rule, it requires much fewer assumptions for its calculation than, for example, for the impaired initial cost. It is also transparent because it clearly demonstrates the financial position of the company. Its decline is impossible to hide in the hope that things will correct in the future. Fair value gives more informationbecause it is based on market data and represents the sum of the opinions of all its participants. Critics say that it is too subject to manipulation, the purpose of which is to show the result desired for manual. However, in practice, the main alternative to the fair value is initial, and it is even more convenient for "income management".
The rapid development of derivative contracts meant that in a value-based system, a number of assets, and possibly, and commitments did not fall into the balance, since they had a small or zero initial value, although they could increase and lose it over time. Accounting at fair value gave the only real opportunity to reflect these transactions in the balance sheet and truly disclose information about them.
Minuses. Fair value is the cost that the company could receive from the sale of an asset at the date of the balance sheet, but did not receive. Since the assessment on it does not require a transaction, this method allows recognition of profits and losses earlier than the assessment method at the initial value. But accounting at fair value leads to overestimation of the size of assets and profits during the recovery period and at the same time exaggerates the decline during the recession period. As a result, there was an opinion that fair value enhances the effects of the business cycle.
Financial institutions complain that accounting on it rather spurs the actions of the business than reflects them, because it encourages banks to give too many loans in good times and exaggerates their problems when the business cycle goes to the decline.
I do not think that the reason for the banking crisis was accounting at fair value. Calls to the cancellation of such accounting look like attempts to lean the problem, which can lead to the final undermining confidence in financial System. Someone could disagree with the answers that give account at fair value and, therefore, consider this method wrong. Others may have believed to the numbers, but regarded this information as too dangerous for the publication. The IFRS Council could use Financial Trouble to implement his long-standing idea - conceptual foundation financial statements. The fair value crisis showed the need to clarify the reporting objectives so that shareholders' expectations were clearly set out and the basis for improving and more properly applying standards. This will be at least one positive consequence of the crisis, which has put serious questions about accountants and standards developers.
Ilya Yuferev, Head of the Association of Chartified Certified Accountants)
The concept of "fair market value" is known to domestic accountants from international theory and practice. IN russian provisions On accounting is used similar in meaning term. The PBU has the concept of "current market value". However, the rules do not contain a clear definition. Moreover, there are no recommendations for its assessment. In this matter, foreign theory and practice of accounting is significantly ahead of the domestic. In MFS, the IFRS 13 standard was introduced relatively recently. It defines. Consider some provisions of the standard.
Definition
Fair cost is the amount of the amount that can be obtained when selling OS or to pay when transferring obligations under normal operations between the turnover participants to the measurement date. It is worth saying that another definition was present in the standard. It is impossible to say that the new section completely changed it. However, in IFRS 13, the concept has been significantly expanded and clarified. From the previous definition, it was clearly not clear - the amount of purchase or sale. The questions arose in preparation of IFRS 3. During the process, it became clear that for US GAAP, fair value isthe exit amount (sale), while in IFRS it was an indicator of exchange - purchase (entry). Another ambiguity was associated with the date on which the measurement is carried out.
Exit Price
According to IFRS 13, fair value is The exit amount. That is, it is an indicator of demand, not a suggestion. EXIT Price - the amount that the seller can get, and not the one on which he would like to sell something. Price and cost - Different figures. And the last practical value is. A similar rule is valid for the obligation. What is the cost in this case? It is the amount that creditors count on repayment is calculated, and not the one that the debtor would like to pay for the disposal of the obligation. As part of the active turnover may differ. This is especially true for operations with stock papers and other financial instruments.
Nuances
Fair value is The amount that is determined by the expectations of future money flows (outflow and inflow) associated with property or obligations from the point of view of the participants in the turnover, which owns them at the date of measurement. Get finances in two ways. An asset or obligation can be used or sell. Even if the participant will exploit the property, the exit price will be determined by the expected flow from implementing it to the subjects, which will receive money from application after the acquisition. In other words, any person when acquiring an asset will only pay for such benefits that he suggests. EXIT Pricing, thus, always acts as a relevant definition of fair value. It does not matter whether the enterprise is going to use property or implement it.
SFO 16.
In this standard, it is allowed to use 2 OS accounting models: at cost and operating value. The first is considered traditional. It is applied in accounting OS in all national systems. The second model involves the reflection of objects at an overvalued value. The relevant procedures should be carried out at such a frequency that is enough to ensure that at any time the OS did not differ much from Exit Price. This model has a logical justification. IN developed states Annual inflation rate is insignificant. In this regard, it is possible to neglect its impact on the value of assets. However, for the OS with a long period of use, the inflationary effect will accumulate over time. Cost objects will lead to the fact that there will be many "heterogeneous indicators" in the balance sheet. Regular will percussion OS will allow them to bring them to one denominator. It is believed that this will give greater reliability to reflect objects in reporting.
IFRS 38.
These standards are also allowed to apply 2 account models. However, in contrast to OS, there is one condition in which the NMA can be applied fair value. it The presence of active turnover. It is determined by the following. The cost of NMA in the active market will be fair - the one that is used to reflect in accounting. This means recognition of unrealized losses or profits from the decrease in / enhancing the estate. They are reflected in other income. These amounts do not fall into loss and profits report. When disposing of overvalued assets, the entire revaluation accumulated on them is written off on unallocated income.
IFRS 41.
This standard defines recognition and special type - biological. Their feature is the transformation process - growth, reproduction, degeneration. These phenomena determine quantitative or qualitative changes. In the standard, it is prescribed to keep records of biological assets and agricultural products at fair value, from which the costs of implementing on the date of harvest is submitted. Thus, the results of the transformation from the moment they appear are reflected. In accordance with the traditional model, changes in such assets show not when they occurred, but when implementing them. This period for some types of products can last up to several years or decades. If the revenue is recognized at the time of completion of biotransformation, and expenses occur during its entire period evenly, then the principle of correlation of income and costs will violate. Consequently, the financial result is distorted. The IFRS Council notes that biotransformation is a unique and fundamental sign of bioactives. In this regard, reflection in the reporting should be carried out immediately as soon as it occurs. Only in this case will allow users to best analyze the financial results and future prospects of an enterprise employed in agricultural production.
Investment real estate
It is devoted to the standard IFRS 40. Such real estate is objects in possession of rental payments from them or capital gains (not for implementation or use in production purposes). The standard establishes that such property should be considered at fair value for each reporting date with the classification of changes in the cost for the period of loss and profits report. It should be taken into account that in a number of states the turnover of real estate is not very active. Accordingly, the assessment of assets is essential. For such cases, the Council provides the ability to choose a metering model, as in IFRS 16.
Exceptions
IFRS 13 is used in cases where other standards are allowed or requires an estimate of fair value. However, there are exceptions. These include:
The latter, in particular, refer to the net value of the implementation, in accordance with IFRS 2, as well as the value of use, according to Standard 36. The net value of the implementation is called the amount that the enterprise is calculated from the sale of its stocks during normal activities.
