Proceedings

proposed guidance does not sufficiently address how to apply the market participant
notion when there is no observable market.
IASB also notified that a part of the respondents considered that fair value should
instead be measured from the entity’s perspective, especially when Level 3 inputs are
involved.
As for the highest and best use and valuation premise, many respondents were
reported to agree with the proposal that fair value reflects the highest and best use of
an asset while other thought inappropriate for a fair value measurement to consider
the highest and best use of an asset. They believe that fair value should better reflect
an entity’s current use of the asset in order not to over-inflate the value and to avoid
inconsistencies between the cash flows generated from using the asset (in the
statement of financial performance) and the value of the asset (in the statement of
financial position).
Even if that subject was one of the most disagreed upon, in our opinion, IASB noticed
in its comments on incremental value, when highest and best use differs from current
use, that several respondents had concerns about the proposal to require an entity to
separate the fair value of an asset group when one or more of the assets is used in a
way that differs from its highest and best use as this is inconsistent with the valuation
premise, which states that all assets within a group must be measured on the same
basis (i.e. either in use or in exchange). Moreover, the opinion was that it will be
costly to measure the value of an asset or an asset group on two different bases (one
being the current use and the other being the highest and best use), particularly since
they think it is costly enough to analyse whether an asset’s current use is its highest
and best use to comply with the proposed requirements.
As for the valuation premise, IASB also did not express in figure the percentage of
those disagreeing, but presented the main concerns as being the lack of relevance of
the highest and best use concept and also confusion by the ‘clarification’ in the
exposure draft that the in-use valuation premise assumes that the asset is sold
individually, not as part of the sale of an asset group.
With respect to fair value at initial recognition in IASB’s view respondents generally
agreed that the four situations listed in the ED might lead to a difference between
entry and exit prices at initial recognition but disagreed with keeping the prohibition
in IAS 39 to defer day 1 gains and losses if the fair value is not based solely on
observable inputs while other thought there should be a clear principle and the type of
asset or liability should not influence the recognition of gains or losses.
IASB considers many respondents agreed with the descriptions of valuation
techniques in the exposure draft and find them helpful, while other respondents,
mainly in the valuation community, believed that an IFRS on fair value measurement
should not contain information about valuation techniques, but valuation standards
and practice guidance should (and already do) address this. The opinion that the
replacement cost approach as a valuation technique is inconsistent with the exit price
notion was also mentioned.
With respect to disclosures requirements, both our findings and IASB’s comments are
in line with each other. Both the agreement with the proposed disclosures in order to
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