Practical Application of Fair Value & Impairment Testing in Financial Reporting: Addressing Common Challenges

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Description

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With the pervasive use of current cost measurement (e.g. fair value and value in use) in financial reporting, fair value accounting is often under-estimated. Impairment testing for goodwill is required to be carried out annually, and this entails estimating the value in use, and sometimes fair value less cost of disposal of cash-generating units (CGUs). Furthermore, the impact of COVID-19 has made impairment provision more relevant.   FRS 109 Financial Instruments now requires unquoted equity investments to be fair valued – the option to measure it at cost is no longer permitted.  

Problem cases will be used to provide participants with the opportunity to carry out impairment testing and apply various valuation approaches and methods to different types of assets including businesses, financial instruments and intangible assets. In addition to covering fair value measurement under FRS 113, the trainer will also share real life experiences and challenges in applying fair value accounting in financial reporting.

Programme Outline

• Relevance of fair value in FRS
  • Impairment of assets
  • Business combinations
  • Financial instruments
  • Share-based payments
  • Investment properties
  • Agriculture
  • Non-current assets held for sale
  • Leases

• Fair Value Measurement Framework
  • Unit of account
  • Valuation premise (including highest and best use)
  • Markets for basis of valuation
  • Valuation approaches (namely market, income and cost approach) and techniques
  • Fair value (premiums and discounts)

• Impairment Testing and Value in Use
  • Objective, scope and basic principles of impairment
  • Assessing reasonableness of forecast by management
  • Estimating future cash flows
  • Determining an appropriate discount rate
  • Estimating terminal value
  • Computing net present value
  • Establishing the carrying amount of CGUs
  • Recognition of impairment losses

• Fair Valuing Unquoted Equity and Debt Investments
  • Classification and measurement of unquoted equity investments
  • Market approach methods
  • Sources of data
  • Key steps in Guideline Publicly-Traded Comparable Method
  • Identify relevant comparables
  • Identify key valuation metrics
  • Perform comparative analysis
  • Adjustments to valuation metrics

• Fair Valuing Intangible Assets
  • Overview of a business combination
  • Types of intangible assets
  • Valuation methods commonly used for intangible assets
  • Key steps in Relief-from-Royalty Method
  • Determining an appropriate discount rate
  • Consideration of economic life
  • Tax amortization benefit (TAB)

Participants are encouraged to bring along their financial calculators or laptop with Excel installed.

This workshop qualifies for 7.0 CPE hours in Financial Reporting Standards and Pronouncements (Category 1).

What you will learn

Participants will learn how to fair value unquoted equity shares, unquoted debt investments, CGUs and intangible assets as well as perform impairment testing of financial assets

Target Audience

Accountants, Auditors, Finance Professionals and anyone interested in the practical application of fair value in financial reporting

Expert Speaker

Ong Woon Pheng
CA (Singapore), FCCA, CFA, ICVS, CFE , ATP (Income Tax)

Woon Pheng has been in the accounting and finance profession since 2001 and he is currently Director of Corporate Finance department at PKF-CAP Advisory Partners Pte Ltd, a member firm of PKF International. He was previously with Kudos CAS and RSM Nelson Wheeler, which are members of global accounting networks.

He is a Chartered Accountant of Singapore (CA Singapore), Fellow Member of Association of Chartered Certified Accountants (FCCA), Chartered Financial Analyst (CFA), Chartered Valuer & Appraiser (CVA), International Certified Valuation Specialist (ICVS), Certified Fraud Examiner (CFE) and Singapore Chartered Tax Practitioner (SCTP).

Currently, he specialises in business valuation, valuation for IFRS (including purchase price allocation, impairment review and valuation of complex financial instruments), financial & tax due diligence and mergers & acquisitions.