1.

0 Introduction and Overview of Fair Value Accounting

International Financial Reporting Standard 13 (IFRS 13) of Financial Value
Measurement sets out in IFRS framework for measuring fair value and requires disclosures
about fair value measurements. It requires or permits of fair value measurements or
disclosures about fair value measurements in specified circumstances. This standard is
beginning on or after 1 January 2012. Malaysia Financial Reporting Standard 13 (MFRS 13)
is implementing by Malaysia Accounting Standards Board (MASB) under IFRS 13.
MFRS 13 classify fair value as a market-based measurement but not an entity-specific
measurement. Fair value defines as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the measurement
date. (MASB) An asset or liability might be available or not available in an observable
market transactions or market information. The objective of fair value measurement allows to
estimate the price at which an orderly transaction to sell the assets or transfer the liability
would take place between market participants at the measurement date under current market
conditions. It happened when an exit price at the measurement date from the perspective of a
market participant that holds the asset or owes the liability.
The measurement and the disclosure of fair value would not applied under MFRS 2
Share-based Payment, MFRS 117 Leases, MFRS 102 Inventories and MFRS 136 Impairment
of Assets. When measuring fair value, an entity uses the assumptions that market participants
would use when pricing the asset or liability under current market conditions, including
assumptions about risk. As a result, an entitys intention to hold an asset or to settle or
otherwise fulfil a liability is not relevant when measuring fair value.
IFRS 13 explained that an entity can measure fair value by several ways. An assets
fair value measure by the particular asset or liability being measured. However, for a nonfinancial asset, the highest and best use of the asset and whether the asset is used in
combination with other assets or on a stand-alone basis. Once, the asset in the market in
which an orderly transaction would take place for the asset or liability. The appropriate
valuation techniques to use when measuring fair value. The valuation techniques used should
maximise the use of relevant observable inputs and minimise unobservable inputs. Those
inputs should be consistent with the inputs a market participant would use when pricing the
asset or liability.