In-combination value premise= When a fair value is measured under this premise, the highest and best use of the asset is where the market participants obtain maximum value through using the asset in combination with other assets and liabilities.3.5 Application to liabilities.The objective of a fair value measurement of a liability is to estimate the price that would be paid to transfer the liability between market participants at the measurement date under current market conditions. In all cases, an entity must maximize the use of relevant observable inputs and minimize the use of unobservable inputs.Prior to the issuance of IFRS 13, the measurement of a liability was commonly based on the amount required to settle the present obligation. As per its definition in IFRS 13, fair value is the amount paid to transfer a liability. The fair value measurement thus assumes that the liability is transferred to another market participant at the measurement date.The transfer of a liability assumes: A liability would remain outstanding and the market participant transferee would be required to fulfil the obligation. The liability would not be settled with the counterparty or otherwise extinguished on the measurement date.The clarification in IFRS 13 that fair value is not based on the price to settle a liability with the existingcounterparty, but rather to transfer it to a market participant of equal credit standing, also affects the assumptions about the principal (or most advantageous) market and the market participants in the exit market for the liability.
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3.5.2. Non-performance risk.When entity measures fair value of a liability, it also keeps non-performance risk in mind. Non-performance risk = The risk that an entity will not fulfil an obligation. Non-performance risk includes, but may not be limited to, the entity's own credit risk.(p.81)3.5.2. Approaches to measuring the fair value of a liability.Where there is a quoted price for an identical or similar liability, that price is used to measure fair value. However, often there will be no quoted prices available for the transfer of an instrument that isidentical or similar to an entity's liability, particularly as liabilities are generally not transferred. For example, this might be the case for debt obligations that are legally restricted from being transferred or for decommissioning liabilities that the entity does not intend to transfer. In such situations, an entity must determine whether the identical item is held by another party as an asset:-If the identical item is held by another party as an asset — measure fair value from the perspective of a market participant that holds the asset;-If the identical item is not held by another party as an asset — measure the fair value using a valuation technique from the perspective of a market participant that owes the liability.
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