An analysis of the impact of IFRS 13 fair value measurement on local listed entities

Abstract

Purpose – This study investigates the potential impact that the new standard on fair value measurement, IFRS 13, will have on local listed entities during its implementation. The study focuses mainly on three main areas, being: the knowledge of local preparers of financial information, the changes in financial statements and internal procedures, and the usefulness of the disclosures to users of financial statements. Design – The objectives of the study were achieved through one to one interviews with 13 representatives of local public listed entities. The interviews were of a semistructured format, and were used to obtain views in relation to the impact of the implementation of IFRS 13. Findings – The findings show that users of financial statements were not knowledgeable on the requirements of IFRS 13. The study further discovers that in relation to fair value measurement, even though the reported fair values are not expected to be impacted significantly, internal procedures are expected to be affected. For the disclosures required under IFRS 13, the study finds that these are expected to affect substantially both financial statements and internal procedures when being applied to non-financial assets. Finally, this study finds that the disclosure requirements are expected to add value to users of financial statements. Conclusions – It has been concluded that local preparers of financial statements should be further encouraged to develop their knowledge in relation to the developments in financial reporting. This should help them to better identify the impacts arising from such developments, and in providing disclosures that maximise their usefulness to users of financial statements. Value – The findings of this study will provide to local preparers of financial statements, information on how the implementation of IFRS 13 is expected to affect an entity’s financial statements and internal procedures. Furthermore, findings also highlight the need of preparers to keep abreast with the latest developments in financial reporting.