IFRS 13 – Fair Value Measurement

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IFRS 13 – Fair Value Measurement

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Title: IFRS 13 – Fair Value Measurement
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Author: Elverum, Oda Ivarsson
Abstract: This thesis is written with the objective of a review of the accounting standard IFRS 13 – Fair Value Measurement, effective from January 2013. Definitions and guidance for disclosure have earlier been spread out in several standards within the IFRS, but with the new IFRS 13, all requirements are collected in one standard. The thesis seeks to examine, whether the new standard will benefit both preparers and users of financial statements. The thesis’ overview of IFRS 13 concludes that the standard’s main focus is to determine fair value on a mark-to-market basis; to find a fair market value, independent of the organisation’s use or intentions for the asset or liability measured at fair value. The thesis examines financial information and its value to users. Different scientist has different views on the value of information when making economical decisions. While William Beaver states that additional, costless information can never be worse for the investor when making investment decisions, research by O’Reilly refutes this. He proves that decision makers in a state of information overload take inferior decisions compared to their relatively less informed counterparts. However, the over informed decision maker is more content about his situation than the less informed investor. Fighting information overload and creating better communication in financial reporting have been the main objectives for the Financial Reporting Council (FRC) when developing the Cutting Clutter project. The preliminary research to the project confirms O’Reilly’s conclusions, as the users of financial statements are generally pleased with the size of annual reports, while preparers believe that accounting standards are too complex. The FRC has developed four guidelines for better communication in financial reporting, as well as four guidelines for better communication in standards. These guidelines form the basis of the evaluation of IFRS 13. The thesis concludes that IFRS 13 – Fair Value Measurement is a high-quality and clearly formulated standard, which should benefit both users of the standard and the subsequent financial report. However, there should be more focus on materiality in the most aggregated disclosures required by the standard.
URI: http://hdl.handle.net/10417/3431
Date: 2012-12-11
Pages: 84 s.
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