 house billahi minash shaitaanir rajim bismillahir rahmanir raheem. Now today's topic is Fair Value Measurement. First of all objective and scope. Learning outcome students will be able to understand what is meant by the term Fair Value. Able to measure Fair Value if it is most readily available, not readily available. Learn how to incorporate the impact of Fair Value Change and how to calculate and present it in the financial statement. Now the user to understand valuation techniques, input, how valuation is done. The understand to understand the effect of Fair Value on PNL or other comprehensive income. Fair Value has a different meanings depending on the context and use. Fair Value is focused on assumptions of the marketplace and is not entity specific. It is therefore taken into account any assumptions about risk. Now let me explain you a few things here that Fair Value standard itself is a standard, is not a standalone standard. Because it is going to be used in many other standards and since it is going to be widely used that is why they need that is to be very very clear that how to work out the Fair Value. Now the other thing is Fair Value not the entity specific. Entity ki apuni jo determination hai wo nahi hai, it should be market value. Aapne market se yuski value ko determine karna hai ke market mauski value kya hai that will be the Fair Value and not entity specific. And for that matter we need to take lot of assumptions because in the market when you go into the market the risk involved so we have to consider all those factors which involve in the market determination of pricing. Now first of all the definition, the whole standard is basically based on this definition and the word we use in this definition. The price that would be received to sell an asset if you want to sell an asset what price you are going to receive or paid to transfer not to settle to transfer reliability in orderly transaction. So we have the assets and we have the liabilities and then he said clearly orderly transaction. Orderly transaction means that nobody is forcing it to sell it and nobody is forcing it to buy it. No, it is simply it is open that if somebody is interested to buy it what they are going to pay for it orderly. Normal transactions in the market then we have between market to market participants although we can simply say buyer and seller but the standard says market participants. The people who are having market going into the market and buying and selling the goods and services or maybe the assets and liabilities so those people and the other one is at the measurement date on that particular date when you want to report it in financial statements on that date what market participants ready to pay for it. Similarly it is an exit price you know when we buy some products that is the entry price but when you are selling it at what price you are selling that is the exact price exact means that we are getting out of it. Fair value information may be more useful than historic cost information why this standard is there because historically we see the assets value in fact let me give you a simple example you got a car you bought it for let us say 20 lakh rupees you run it for 5 years and still you can get 520,000 rupees how it is possible it is possible because the prices of car are going up enough so that is what historically the car may be nil value in the balance sheet because 5 years 20% of precious nil but the is still working and so that is why we need to report that car at fair value how much we get in the market for it. Then the other thing use of fair value financial reporting increasing it is required standard require that let the company should report their assets and liabilities at fair value rather than historical value. An orderly transaction is one that assume exposure to the market for a period before the date of measurement to allow for formal market activities normal market activities and to ensure that it is not a forced sale as I said it is not a forced sale it is anybody who is interested to buy say what price they are going to pay. Now these fair value of what assets and liabilities assets are financial assets and assets are non financial assets so later on we will come up to these standards where we are going to make use of these fair value calculations if they are non current assets or if they are current assets or if they are financial assets if they are non financial assets similarly liabilities we have to consider while calculating it and do remember again the assets and liability no matter whether non financial or financial use unit of account method what is this unit of account method for example you got 10 machines so you calculate for each machine what is going to be its value or if you want to put together so that is possible that you can have a group of machines and then you and you can calculate the fair value of the total of it but normally they are numbers non financial assets use highest and best use that is again a very important word here highest and best use you know you can use it yourself you can sell it or you can convert it yeah you can make so many use of an assets so you must select best use of it here best use means economically possible legally permissible and financially feasible that that will be the most highest use value now the other thing principle and most advantage is market market participants you know these three words principle most advantages and market participants as I said market participants are buy and sellers but so for the principle market the main market which deals in that particular assets and liability in case let's say if you are talking about cotton so mainly cotton textile they have separate market if say you want to garment market then we have here in Pakistan in Lahore even this is a club market so the principle market where mostly people are buying and selling large amount of assets buying and selling most advantages in the sense that you have one two three markets which market which is select definitely the market which gives us a best price so then okay reaching to the one market to other market there is a transport cost also so we must consider that transport cost also but do remember there is a transaction cost as that buying and selling there is a transaction cost so we should not consider transaction cost we should consider only the transportation cost while selecting the best market then independent the participant should be independent mean they are not putting coming together and then buying something no they are independent knowledgeable they know that these products is available here here here and this price and this price so he has are knowledgeable then we link to willing to enter then they are also interested to why they it's not that that they are not interested but they are interested to buy orderly transaction and motivated to transact that they are interested really to buy it going into that that transaction that really as I mentioned earlier antiprice and exit price exit price is a fair value so we should come up with the exact price the difference between antiprice and exact price is the profit or loss thank you very much