Ifrs

IFRS 13 Fair value

measurement

IFRS 13 Fair value values

21st century real estate

measurement

Implications for the real estate

21st century real estate values

and construction industry

Implications for the real estate

and construction industries

Contents

1. Introduction

2

2. Principal impacts of the new standard

2

3. The definition of fair value

3

4. The concept of ‘highest and best use’

3

4.1 Assessment

3

4.2 Valuing the highest and best use — alternative use and asset modifications

4

4.3 Highest and best use and impairment testing

4

5. The valuation premise for property interests

5

6. Assessing whether an appraisal complies with IFRS 13

5

7. Appropriate valuation techniques

6

8. Applying the fair value hierarchy to real estate appraisals

7

9. Expanded disclosure requirements

8

10. Final thoughts

9

IFRS 13 Fair value measurement — 21st century real estate values

Implications for the real estate and construction industries

1

1. Introduction

2. Principal impacts of the new standard

IFRS 13 Fair Value Measurement has been recently released by

the International Accounting Standard Board (IASB).

For real estate entities, the adoption of IFRS 13 could result in

significant changes to processes and procedures for determining

fair value and providing the required disclosures. While the

requirement to determine fair value by reference to market

participants is not new, the definition of fair value in IFRS 13 differs

from that proposed by International Valuation Standards (IVS),

which are the generally accepted standards for professional

appraisal practice in valuing real estate internationally. The fair

value framework set out in IFRS 13 contains specific requirements

relating to ‘highest and best use’, valuation premise, and principal

market. This may require entities and their appraisers to re-evaluate

their methods,...