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M&A hub: Developments driving and shaping M&A
Key legal and regulatory developments driving and shaping M&A
United Kingdom | Publication | June 2023
On 13 June 2023, the Financial Reporting Council (FRC) published a thematic review of ‘fair value measurement’. The FRC points out that IFRS 13 ‘Fair Value Measurement’, has featured in the Corporate Reporting Review (CRR) team’s Top Ten matters of challenge several times in the past. While the application of IFRS 13 is, based on the FRC’s work, generally satisfactorily applied by larger companies and its principles are well understood by certain sectors such as banking, insurance and real estate, the FRC notes that smaller companies can struggle with the requirements.
Different IFRSs require or permit companies to measure or disclose the fair value of assets, liabilities or own equity instruments. IFRS 13 provides a framework for measuring fair value and enhances the disclosures about fair value measurements. The FRC believes that the challenging economic environment and the risks posed by climate change may increase the degree of estimation uncertainty and management judgement in this area. Consequently, clear and transparent disclosures of fair value measurements are likely to become increasingly important. While this thematic review is not intended to be a guide to valuations, it does discuss the CRR's experiences with IFRS 13 and has a particular focus on disclosure matters, although some measurement issues are also discussed.
Case studies and examples of good practice
Although the thematic review focuses on disclosure matters, it includes two case studies to highlight measurement issues the FRC found in its routine monitoring of corporate reporting.
To encourage improvement in the general quality of company disclosures, the thematic review also includes examples of good practice, each of which demonstrates a particular characteristic of a better disclosure.
(FRC, Thematic Review – IFRS 13 ‘Fair value measurement’, 13.06.2023)
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