manticore-projects Fair Value Measurement

IFRS 13 Fair Value Measurement specifies the requirements with respect to Fair Value calculation and provides a single IFRS framework for measuring Fair Value. Depending on the accounting category of the financial instrument, the Fair Value measurement might be either used directly to determine the balance sheet value, and/or as a part of the required quantitative disclosures. The Standard defines Fair Value on the basis of an 'exit price' notion. Furthermore the Standard uses a 'fair value hierarchy' (fair value levels). This results in a market-based, rather than entity-specific, measurement.

Coverage

iFRS-VBox calculates the Fair Value of all relevant financial instruments. This includes instrument in portfolios like:

Fixed Income Securities (e.g. T-Bills, Bonds, Notes,...):

  • Trading portfolio (highly liquid positions)
  • Liquidity buffers (AFS – Available-For-Sale)
  • Held-To-Maturity (HTM) investments (FV for disclosure purposes)

Lending, loans, loan-like assets (FV for disclosure purposes):

Own issued bonds, borrowings, other liabilities:

  • Declared 'At-Fair-Value-Through-Profit-and-Loss'
  • Repo (FV typically for disclosure purposes)
  • Other liabilities measured at Amortized Cost (FV for disclosure purposes).

Fair Value Levels

iFRS-VBox supports both a mark-to-market valuation (IFRS 13: level 1, for instruments traded on deep, liquid markets) and mark-to-model valuation (IFRS 13: level 2).

Approach and market relevenace

For the purpose of the mark-to-model valuation, iFRS-VBox starts from the raw contractual data and the raw market data. The system automatically calibrates the parameters of the model (yield curve, spread, discount factors).

The approach of iFRS-VBox is appropriate also for the specific situation of the financial markets in the emerging economies. It works accurately, for example, even in the absence of a deep and liquid money market and correspondingly lack of reference yield curves like EURIBOR or US-LIBOR. The model parameters are calibrated solely on the available raw market data and are not required as input to the system.