Question

State differences in application of fair value measurement for financial instruments, as compared to property, plant and equipment and investment property.

Answer 1

The use of fair value in measuring assets and liabilities will increase considerably upon adoption of theIFRS, which mandates the use of fair value in remeasurement of financial instruments, employee compensation, shure-based payments, and assets and liabilities acquired in a business combination, o namea few It will allow it at fair value, as opposed to cost in relation to property, plant and equipment,intangible assets and investment properties

The application of these fair value principles would require a company management is considerable judgement in making estimates about the future, and the role of valuation experts in the prepareation of financial statements would increase significantly Thus, the IFRS will be far more complex and challenging in its application compared with the existing regime of accounting standards In the case of derivatives, held for trading Investments and investmentproperties, the IFRS allows gains or losses on fair valuation to be recognized in profit or loss accounts for the period. Undoubtedly, to allow even unrealized gains to be captured in profit or loss accounts is quite a bold move. In such a situation, there will be greater onus on the management to exercise better financial discipline, otherwise, the company may end up declaring dividends out of unrealized profits