Investor Presentaiton
HKAS 1.51(a)
HKAS 1.49
HK Listco Ltd
Financial statements for the year ended 31 December 2023
HKFRS 13.91
92, 99,C1-C3
HKFRS 13.93(a)
161
162
HKFRS 13 contains a comprehensive disclosure framework for fair value measurement. The objective of the disclosures for assets and
liabilities that are measured at fair value after initial recognition is:
to provide information that enables users of financial statements to assess the methods and inputs used to develop those
measurements; and
to assess the effect of the measurements on profit or loss or other comprehensive income of recurring fair value measurements that
are based on significant unobservable inputs.
Paragraphs 93 to 99 of HKFRS 13 list out the disclosures required by the standard. The disclosure requirements apply only to fair value
measurements made after initial recognition and vary depending on whether the fair value measurement is "recurring" or "non-recurring",
and depending on which level of the 3-level fair value hierarchy (as further discussed in footnote 164 below) that the assets or liabilities are
categorised within. As explained in footnote 162 below, recurring fair value measurements arise from assets or liabilities measured on a
fair value basis at each reporting date. All other measurements using fair value after initial recognition are "non-recurring". The most
extensive disclosure requirements are for "Level 3" measurements that are recurring.
Paragraph 92 of HKFRS 13 explicitly requires that if the disclosures provided in accordance with the standard and other HKFRSS are
insufficient to meet the above-mentioned disclosure objectives, entities should disclose additional information necessary to meet those
objectives.
Unless another format is more appropriate, the quantitative disclosures required by HKFRS 13 should be presented in a tabular format (i.e.
instead of being a narrative note).
In this illustration, HK Listco provides HKFRS 13 disclosures for its investment properties and properties held for own use in note 11(b), and
financial instruments in note 33(f).
Recurring fair value measurements arise from assets or liabilities measured on a fair value basis at each reporting date. Examples of
recurring fair value measurements include investment properties accounted for using fair value model under HKAS 40, properties held for
own use measured at revaluation model under HKAS 16, financial assets at fair value through profit or loss and financial assets at fair value
through other comprehensive income under HKFRS 9.
Non-recurring fair value measurements made after initial recognition are those that are triggered by particular circumstances. Non-
recurring fair value measurements include an asset being classified as held for sale and measured at fair value less costs to sell under HKFRS
5.
HKAS 40.40A,
HKFRS 16.34-35
163
HKFRS 13.93(b),
72-90
164
HKFRS 13.94
The right-of-use assets, and not the underlying property, shall be measured at fair value, when the lessee uses the fair value model to
measure an investment property that is held as a right-of-use asset. This also applies to the situations where the lessee measures the right-
of-use assets at revalued amounts applying HKAS 16.
For recurring and non-recurring fair value measurements, entities are required to disclose the level of the fair value hierarchy within which
the fair value measurements are categorised in their entirety. The level into which a fair value measurement is classified is determined
with reference to the observability and significance of the inputs used in the valuation technique for that particular asset or liability as
follows:
•
Level 1 valuations: these are valuations which use only Level 1 inputs i.e. these use unadjusted quoted prices in active markets for
identical assets or liabilities at the measurement date.
• Level 2 valuations: these are valuations that use Level 2 inputs i.e. observable inputs which fail to meet Level 1 (e.g. because the
observable inputs are for similar, but not identical assets or liabilities) and do not use significant unobservable inputs. Unobservable
inputs are inputs for which market data are not available.
•
Level 3 valuations: these are valuations which cannot be classified as Level 1 or Level 2. This means that the valuation is estimated
using significant unobservable inputs.
In some cases, the inputs used to measure the fair value might be categorised within different levels of the fair value hierarchy. In those
cases, the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is
significant to the entire measurement (Note: Level 1 is considered as the highest, Level 3 is the lowest). This means that if the valuation
technique uses significant unobservable inputs, then the fair value of that asset or liability should be classified as a "Level 3" valuation.
165 For recurring and non-recurring fair value measurements, entities are required to disclose, for each class of assets and liabilities, the fair
value measurement at the end of the reporting period, and for non-recurring fair value measurements, the reasons for the measurement.
As stated in paragraph 94 of HKFRS 13, "class" is determined based on the nature, characteristics and risks of the asset or liability; and the
level of the fair value hierarchy within which the fair value measurement is categorised. When another HKFRS specifies the class for an
asset or a liability, entities may use that class in providing the disclosures required by HKFRS 13, if that class meets the requirements in
paragraph 94 of HKFRS 13. In this illustration, so far as the fair value disclosures for properties are concerned, HK Listco has taken into
account the location and the type of property when identifying separate classes for the purpose of HKFRS 13.
As stated in paragraph 94 of HKFRS 13, the number of classes may need to be greater for Level 3 fair value measurements as they have a
greater degree of uncertainty and subjectivity.
105
© 2023 KPMG, a Hong Kong partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited ("KPMG International"),
a private English company limited by guarantee. All rights reserved.View entire presentation