Commission Regulation (EC) No 1126/2008 of 3 November 2008 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council (Text with EEA relevance) (c. 1126)

ANNEX U.K. INTERNATIONAL ACCOUNTING STANDARDS

INTERNATIONAL ACCOUNTING STANDARD 39 Financial instruments: recognition and measurement

Appendix A Application guidance

MEASUREMENT (paragraphs 43-70) U.K.

[F1 Fair value measurement considerations (paragraphs 48-49)] U.K.

F1 AG69 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

F1 AG70 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

F1 Active market: quoted price U.K.

F1 AG71 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

F1 AG72 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

F1 AG73 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

No active market: valuation technique U.K.

F1 AG74 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

F1 AG75 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

[F2 AG76 The best evidence of the fair value of a financial instrument at initial recognition is normally the transaction price (ie the fair value of the consideration given or received, see also IFRS 13). If an entity determines that the fair value at initial recognition differs from the transaction price as mentioned in paragraph 43A, the entity shall account for that instrument at that date as follows: U.K.

(a)

at the measurement required by paragraph 43 if that fair value is evidenced by a quoted price in an active market for an identical asset or liability (ie a Level 1 input) or based on a valuation technique that uses only data from observable markets. An entity shall recognise the difference between the fair value at initial recognition and the transaction price as a gain or loss.

(b)

in all other cases, at the measurement required by paragraph 43, adjusted to defer the difference between the fair value at initial recognition and the transaction price. After initial recognition, the entity shall recognise that deferred difference as a gain or loss only to the extent that it arises from a change in a factor (including time) that market participants would take into account when pricing the asset or liability.]

Textual Amendments

F2 Substituted by Commission Regulation (EU) No 1255/2012 of 11 December 2012 amending Regulation (EC) No 1126/2008 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council as regards International Accounting Standard 12, International Financial Reporting Standards 1 and 13, and Interpretation 20 of the International Financial Reporting Interpretations Committee (Text with EEA relevance).

[F2 AG76A The subsequent measurement of the financial asset or financial liability and the subsequent recognition of gains and losses shall be consistent with the requirements of this Standard.] U.K.

F1 AG77 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

F1 AG78 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

F1 AG79 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

No active market: equity instruments U.K.

[F2 AG80 The fair value of investments in equity instruments that do not have a quoted price in an active market for an identical instrument (ie a Level 1 input) and derivatives that are linked to and must be settled by delivery of such an equity instrument (see paragraphs 46(c) and 47) is reliably measurable if (a) the variability in the range of reasonable fair value measurements is not significant for that instrument or (b) the probabilities of the various estimates within the range can be reasonably assessed and used when measuring fair value. U.K.

AG81 There are many situations in which the variability in the range of reasonable fair value measurements of investments in equity instruments that do not have a quoted price in an active market for an identical instrument (ie a Level 1 input) and derivatives that are linked to and must be settled by delivery of such an equity instrument (see paragraphs 46(c) and 47) is likely not to be significant. Normally it is possible to measure the fair value of a financial asset that an entity has acquired from an outside party. However, if the range of reasonable fair value measurements is significant and the probabilities of the various estimates cannot be reasonably assessed, an entity is precluded from measuring the instrument at fair value.] U.K.

F1 Inputs to valuation techniques U.K.

F1 AG82 An appropriate technique for estimating the fair value of a particular financial instrument would incorporate observable market data about the market conditions and other factors that are likely to affect the instrument's fair value. The fair value of a financial instrument will be based on one or more of the following factors (and perhaps others). U.K.

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Textual Amendments

F1 Deleted by Commission Regulation (EU) No 1255/2012 of 11 December 2012 amending Regulation (EC) No 1126/2008 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council as regards International Accounting Standard 12, International Financial Reporting Standards 1 and 13, and Interpretation 20 of the International Financial Reporting Interpretations Committee (Text with EEA relevance).