In most circumstances a liability will be held as an asset by another entity

In most circumstances a liability will be held as an

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In most circumstances, a liability will be held as an asset by another entity. IFRS 13 states that measurement of the corresponding asset should be in the following descending order of preference: 1. The quoted price of the asset in an active market; 2. The quoted price for the asset in a market that is not active; 3. A valuation under a technique such as: Income approach: present value techniques could be used based on the expected future cash flows a market participant would expect to receive from holding the liability as an asset. Market approach: the measure would be based on quoted prices for similar liabilities held by other parties as assets. When there is a decommissioning liability, the liability isn’t hold as an asset. Therefore another valuation technique should be used. Example:
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3.6. Application to measurement of an entity’s own equity. Fair value of entity’s own equity must be measured for example by forming a business combination issues its own equity instruments as part of the consideration for the exchange. Therefore, in general, the principles set out in section 3.5 (in relation to liabilities) also apply to an entity's own equity instruments, except for the requirement to consider non-performance risk, which does not apply directly to an entity's own equity. 3.7. Application to financial instruments with offsetting positions . Financial instruments consist of both financial assets and financial liabilities. An entity may hold both financial assets and financial liabilities and so be exposed to both market risk (e.g. interest rate risk, currency risk or other price risk) and to the credit risk of each of its counterparties. Entities may manage some or all of these financial instruments as a group (or portfolio), having a net exposure to a particular risk(s). In such a situation, IFRS 13 allows entities to make an accounting policy choice to measure the fair value of a group of financial assets and liabilities based on the price that would be received to sell a net long position or transfer a net short position for a particular risk exposure. 3.8 Disclosure. 3.8.2. Disclosure requirements. The disclosures are designed to provide users of financial statements with additional transparency regarding: - The extent to which fair value is used to measure assets and liabilities; - The valuation techniques, inputs and assumptions used in measuring fair value; - The effect of Level 3 fair value measurements on profit or loss (or other comprehensive income).
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