IFRS 13 - Fair Value Measurement

5/14/2026

Before IFRS 13 was issued in May 2011, fair value guidance was scattered across more than 20 different standards, with inconsistent definitions. IFRS 13 was developed to address this issue by providing a single reference framework: one definition, one input hierarchy, and one set of disclosure requirements consistently applied to all assets and liabilities measured at fair value.

1. What is fair value?

IFRS 13 (paragraph 9) defines fair value as:

Fair Value (FV) is 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.

Four core technical aspects that need to be properly understood:

Aspect	Description and practical implications
Exit Price	The price that would be received when SELLING an asset in the market, rather than the amount originally paid to acquire it. This is particularly important in illiquid markets, where the bid-ask spread may be very wide.
Orderly Transaction	Assumes normal market conditions, rather than a forced liquidation or distressed sale. If the seller is experiencing financial difficulties, the transaction may not qualify as the sole basis for determining fair value.
Market Participants	Reflects the objective perspective of independent and knowledgeable buyers and sellers, rather than the reporting entity's own perspective. Entity-specific strategic advantages are not taken into account, creating a clear distinction from Value in Use.
Measurement Date	Value determined at a specific point in time. Data must be updated periodically and should not be reused from a previous reporting period without reassessment.

2. Interaction between IFRS 13 and other relevant standards

Fair value plays a central role in a number of important IFRS Standards , as follows:

IFRS	Required	Permitted	Explanation
IFRS 3 - Business Combinations	x		All identifiable assets and liabilities in a business combination are measured at fair value at the acquisition date.
IFRS 5 - Non-current Assets Held for Sale and Discontinued Operations	x		A non-current asset or disposal group, once classified as held for sale, is measured at the lower of its carrying amount and fair value less costs to sell.
IAS 16 - Property, Plant and Equipment		x	An entity may elect either the cost model or the revaluation model for subsequent measurement. Under the revaluation model, an asset is carried at its fair value at the date of revaluation less subsequent accumulated depreciation and subsequent accumulated impairment losses, provided that fair value can be measured reliably.
IAS 19 - Employee Benefits	x		For defined benefit plans, measurement of the net defined benefit asset or liability requires the application of an actuarial valuation method, attribution of benefits to periods of employee service, and the use of actuarial assumptions. The fair value of any plan assets is deducted from the present value of the defined benefit obligation to determine the resulting deficit or surplus.
IAS 28 - Investments in Associates and Joint Ventures & IFRS 11 - Joint Arrangements		x	When an investment in an associate or joint venture is held by, or is held indirectly through, an entity that is a venture capital organisation, mutual fund, unit trust or similar entity, including investment-linked insurance funds, the investor may elect to measure that investment at fair value through profit or loss in accordance with IFRS 9.
IAS 36 - Impairment of Assets	x		IAS 36 seeks to ensure that assets are not carried at more than their recoverable amount. Recoverable amount is the higher of fair value less costs of disposal and value in use.
IAS 38 - Intangible Assets		x	An entity may elect either the cost model or the revaluation model for subsequent measurement. Under the revaluation model, an asset is carried at its fair value at the date of revaluation less subsequent accumulated amortisation and subsequent accumulated impairment losses, provided that fair value can be measured reliably.
IFRS 9 - Financial Instruments	x		All financial instruments are initially measured at fair value, plus or minus transaction costs in the case of a financial asset or financial liability that is not measured at fair value through profit or loss.
IAS 40 - Investment Property		x	An entity is permitted to choose between the fair value model and the cost model for subsequent measurement.
IAS 41 - Agriculture	x		Biological assets are measured at initial recognition and at the end of each reporting period at fair value less costs to sell. Agricultural produce harvested from an entity's biological assets is measured at fair value less costs to sell at the point of harvest.

Scope note: IFRS 13 does NOT apply to: lease transactions under IFRS 16 (right-of-use assets are measured under the specific cost model prescribed by IFRS 16), share-based payment transactions under IFRS 2, and measurements that are similar to fair value but are not fair value, such as value in use under IAS 36 or net realisable value (NRV) under IAS 2.

3. Fair value hierarchy - three input levels

The overarching principle is to maximise the use of observable market inputs and minimise reliance on internal estimates. The hierarchy applies to valuation inputs, not to the asset itself or the valuation technique. The same asset may move between levels as market liquidity changes.

3.1. Level 1 - Quoted prices in active markets (highest reliability)

Unadjusted quoted prices in markets where transactions take place with sufficient frequency and volume. A key principle under IFRS 13.69 is that quoted prices must not be adjusted even when the entity holds a large position that could affect the price. Any adjustment would result in classification within Level 2 or Level 3.

Examples in Vietnam: VN30 shares listed on HOSE; Government bonds traded on the HNX secondary market; Robusta coffee on ICE Futures; rubber on TOCOM.

3.2. Level 2 - Indirectly observable inputs

Applies when directly quoted prices are unavailable but the market provides sufficient observable data, such as prices for similar assets, yield curves, foreign exchange rates and credit spreads. An entity may adjust the inputs, but such adjustments must be based on observable and supportable evidence.

Example in Vietnam: Unlisted corporate bonds valued using Government bond yield curves plus a credit spread corresponding to the issuer's industry and credit rating.

3.3. Level 3 - Unobservable inputs (highest degree of professional judgement required)

Applies when market data is unavailable or not sufficiently representative. Under IFRS 13.89, even when internal data is used, assumptions must reflect those that market participants would use, rather than entity-specific assumptions.

Common examples in Vietnam: Land use rights in illiquid markets; biological assets (shrimp ponds, rubber plantations, coffee plantations); intangible assets arising from M&A transactions (brands, customer relationships); shares in private companies for which sufficiently representative comparable companies are unavailable.

4. Three categories of valuation techniques

IFRS 13 does not prescribe a single valuation method. It requires the use of appropriate valuation techniques while maximising the use of observable inputs. Where different techniques produce significantly different results, this indicates that the underlying assumptions and inputs should be reassessed, rather than selecting the method that produces the most favourable result.

Approach	Mechanism and tools	Most suitable for
Market Approach	Based on prices and other relevant information generated by actual market transactions involving comparable assets. Tools: Comparable Company Analysis (CCA) and Precedent Transactions.	Where sufficiently representative and observable comparable data is available, typically Level 1-2.
Income Approach	Converts future cash flows into a present value. Tools: Discounted Cash Flow (DCF) models and option pricing models such as Black-Scholes and binomial models. WACC is typically one of the most sensitive inputs.	Assets that generate reasonably forecastable cash flows, such as investment property, intangible assets and private businesses, typically Level 2-3.
Cost Approach	Based on current replacement cost adjusted for depreciation, or Depreciated Replacement Cost. It reflects the amount currently required to replace the service capacity of an asset after allowing for physical deterioration, functional obsolescence and economic obsolescence.	Specialised tangible assets for which no active market exists and which do not generate independent cash flows, typically Level 3.

5. Vietnam context - Specific asset classes

Asset class	Key challenges	Typical hierarchy level	Recommended approach
Investment property (IAS 40) - office and retail	Limited publicly available transaction data; quoted asking prices may reflect only the seller's expectations.	Level 3	DCF + reference to an independent valuation. Ideally supported by 3-5 comparable completed transactions within the preceding 12 months.
Land Use Rights (LURs)	Land is under all-people ownership; valuation requires analysis of land classification, remaining term and transferability.	Level 2-3 depending on location	Market approach with adjustments for legal factors. The State land price list may serve as a reference point but should be adjusted to reflect market value.
Intangible assets arising from M&A transactions (brands, customer relationships)	There is generally no active market for such assets.	Level 3	Relief-from-Royalty for brands; MPEEM for customer relationships. An independent valuation specialist is essential.
Biological assets (IAS 41) - shrimp, fish, coffee	Intermediate growth stages generally lack directly observable market transactions.	Level 1-3 depending on the stage of development	FVLCTS (fair value less costs to sell). At harvest stage, Level 1 may apply; for growing biological assets, DCF or the cost approach may be appropriate.

6. Disclosure requirements - Enhancing transparency around estimates

IFRS 13 requires more than a single number. It requires a sufficiently compelling explanation to enable users of financial statements to assess the reasonableness of the measurement and the level of risk inherent in the valuation.

General requirements for all hierarchy levels

Valuation techniques: the methods applied and the reasons for their selection.
Inputs: the significant parameters incorporated into the valuation model.
Transfers between hierarchy levels: the reasons for and timing of transfers during the reporting period.

Additional requirements specifically for Level 3

Reconciliation: opening balance to closing balance, separately presenting unrealised gains/losses, purchases or additions, disposals, and transfers into or out of Level 3.
Valuation process: how assumptions are developed and the internal control procedures applied to ensure objectivity.
Sensitivity analysis (IFRS 13.93(h)): the extent to which fair value would change if one or more inputs were changed to reasonably possible alternative assumptions.

Note: Sensitivity analysis is often performed as a formality during the early stages of implementation. In practice, however, this is information that institutional investors and auditors pay particular attention to, as it reflects management's governance capabilities and understanding of the uncertainty inherent in its accounting estimates.

7. A sustainable implementation roadmap and required actions

Applying IFRS 13 in practice is not a one-off exercise. It is an operating process that needs to be established and maintained within the enterprise's governance system. Crowe Vietnam summarises several key pillars as follows:

Pillar	Key activities and deliverables
Team capabilities	Provide training so that the team understands the underlying rationale behind each requirement, rather than only the calculation techniques. Key questions include: "Why must fair value be determined from the perspective of market participants?" "Why must Level 1 quoted prices not be adjusted?"
Standardised documentation	Each measurement exercise should be supported by a documentation package covering: (1) the basis for selecting the valuation method, (2) detailed data sources, (3) assumptions and the internal approval process, and (4) sensitivity analysis results. Documentation should be maintained consistently to track movements in asset values across reporting periods.
Independent specialists	For material Level 3 assets, engaging an independent valuation specialist is, in practice, essential rather than merely best practice. Note that the expertise required for real estate valuation differs from that required for business or intangible asset valuation. The appropriate specialist should therefore be selected based on the type of asset.

Required actions:

Step 1: Identify balances or transactions that are required or permitted to be measured or disclosed at fair value, and determine when such measurement or disclosure is required.
Step 2: Refer to IFRS 13 for guidance on determining fair value at initial recognition.
Step 3: Refer to the relevant IFRS Standards to determine whether subsequent measurement of the account balance is at fair value and/or whether fair value disclosures are required.

Conclusion

Transitioning to IFRS 13 is a strategic step in enhancing the transparency of financial reporting by Vietnamese enterprises. The true value of the Standard does not lie in a single number, but in its ability to faithfully reflect the economic substance of assets at the reporting date. Three prerequisites are critical for effective implementation: a properly trained team, standardised valuation documentation that is consistently maintained, and the involvement of independent specialists for material Level 3 assets.

Contact Crowe Vietnam's team of professionals today for specialised IFRS advisory solutions to help your enterprise confidently advance on its journey towards greater financial transparency!