financial-reporting-oil-gas-industry

13. Fair value of assets and liabilities

Issue	IFRS
Definition of fair value	Fair value is the amount for which
	the asset could be exchanged
	or a liability be settled between
	knowledgeable, willing parties in
	an arm’s length transaction. IFRS
	does not specifically refer to either
	an entry or exit price.
	IFRS does not contain guidance
	about which market should be used
	as a basis of measuring fair value
	when more than one market exists.
	The fair value definition of a
	liability uses a settlement concept.

US GAAP

Fair value is defined 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. The exchange price represents an exit price.

Fair value measurements include the concept of ‘highest and best use’ which refers to how the market participants would use an asset

to maximise the value of asset or group of assets.

The fair value definition of a liability is based on a transfer concept and reflects nonperformance risk, which generally considers the entity’s own

credit risk.

Under both IFRS and US GAAP, observable markets typically do not exist for many assets acquired in a business combination. As a result for many non financial assets, the principal or most advantageous market will be represented by a hypothetical market, which likely will be the same under both frame works.

differences GAAP IFRS/US – B Appendix

Financial reporting in the oil and gas industry		151

Acknowledgements

	Authors	Review Panel
	Mary Dolson	Mark King
	Telephone: [phone]	Telephone: [phone]
	Email: [e-mail]	Email: [e-mail]
	Derek Carmichael	Randol Justice
	Telephone: [phone]	Telephone: [phone]
	Email: [e-mail]	Email: [e-mail]
	Akhil Kapadiya	Nick Henry
	Telephone: [phone]	Telephone: [phone]
	Email: [e-mail]	Email: [e-mail]
	Alfredo Ramirez	Edo Kienhuis
	Telephone: [phone]	Telephone: [phone]
	Email: [e-mail]	Email: [e-mail]

152 Financial reporting in the oil and gas industry

Contact us

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154	Financial reporting in the oil and gas industry

The Americas	Further information
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