ASBE No. 39
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Fair Value Measurement
Fair Value Measurement is part of the Chinese Accounting Standards for Business Enterprises (ASBE).
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Conceptual Framework Linkage
A single, consistent fair value methodology across ASBE
ASBE No. 39 establishes a SINGLE, unified DEFINITION and MEASUREMENT hierarchy for "FAIR VALUE" APPLICABLE across EVERY other ASBE standard that REQUIRES a fair VALUE measurement – CLOSELY converged with IFRS 13 internationally, REPLACING what was PREVIOUSLY scattered fair VALUE guidance ACROSS individual ASBE standards.
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Scope – a Unified Framework Across All of ASBE
Applies wherever another ASBE standard requires fair value measurement
This Standard applies WHEREVER another ASBE standard REQUIRES (or PERMITS) a fair VALUE measurement – INCLUDING investment PROPERTY (ASBE No. 3), biological ASSETS (ASBE No. 5), non-MONETARY exchanges (ASBE No. 7), business COMBINATIONS (ASBE No. 20), and FINANCIAL instruments (ASBE No. 22).
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Fair Value Defined – an Exit Price Notion
The price to sell an asset or transfer a liability
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 – a GENUINE "EXIT price" notion, DIRECTLY mirroring IFRS 13'S own DEFINITION internationally.
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The Three-Level Fair Value Hierarchy
Prioritising observable market inputs over unobservable estimates
LevelDescription
Level 1QUOTED prices in ACTIVE markets for IDENTICAL assets/liabilities
Level 2OBSERVABLE inputs OTHER than quoted PRICES
Level 3UNOBSERVABLE inputs, USED only when OBSERVABLE market data is NOT available
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The Principal (or Most Advantageous) Market
Measuring based on the market with the greatest volume and activity
FAIR value is MEASURED based on the PRICE in the PRINCIPAL market for the ASSET or LIABILITY (the MARKET with the GREATEST volume and LEVEL of activity) – or, in the ABSENCE of a PRINCIPAL market, the MOST ADVANTAGEOUS market (MAXIMISING the AMOUNT received for an ASSET, or MINIMISING the amount PAID to transfer a LIABILITY).
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Highest and Best Use for Non-Financial Assets
Valuing an asset based on its optimal use by market participants
FOR non-FINANCIAL assets, FAIR value MEASUREMENT considers a MARKET participant's ABILITY to GENERATE economic BENEFITS through the ASSET'S "HIGHEST and BEST use" – WHICH may DIFFER from the ASSET'S current USE by the REPORTING entity ITSELF.
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Unifying Previously Scattered Guidance
A single reference point, replacing standard-by-standard fair value rules
BEFORE this Standard, FAIR value measurement GUIDANCE was SCATTERED across the INDIVIDUAL ASBE standards that HAPPENED to require IT – WITHOUT a SINGLE, consistent DEFINITION or HIERARCHY applicable UNIFORMLY across ALL of them. ASBE No. 39 CONSOLIDATED this into ONE unified reference FRAMEWORK – CLOSELY paralleling how IFRS 13 ITSELF consolidated SCATTERED fair value GUIDANCE internationally.
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Worked Example – Classifying a Level 1 Measurement
The highest-quality fair value input
Example: Listed equity securities
A company holds shares in a company listed on the Shanghai Stock Exchange, with a readily available, actively traded quoted market price.
This is classified as a LEVEL 1 fair value MEASUREMENT – the QUOTED market PRICE for an IDENTICAL asset in an ACTIVE market PROVIDES the HIGHEST-quality, MOST directly observable FAIR value input AVAILABLE.
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Worked Example – Classifying a Level 3 Measurement
Relying on unobservable inputs
Example: An unlisted equity investment
A company holds a small equity stake in an unlisted start-up, with no observable market price, relying on a discounted cash flow model based on internal projections.
This is classified as a LEVEL 3 fair value MEASUREMENT – RELYING on GENUINELY unobservable INPUTS, requiring the GREATEST degree of JUDGEMENT among the THREE hierarchy levels.
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Disclosure Requirements
What ASBE No. 39 requires
Fair value hierarchy level for each class of asset/liability measured at fair valueValuation techniques and significant unobservable inputs used for Level 3 measurementsTransfers between hierarchy levels during the period
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Critical Judgments & Estimates
Where judgement matters most
SIGNIFICANT JUDGEMENTS
Correctly classifying a fair value measurement within the appropriate hierarchy level
SIGNIFICANT ESTIMATES
Unobservable inputs and valuation model assumptions used for Level 3 measurements
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Relationship to IFRS 13
Comparison – ASBE 39 vs IFRS 13
FeatureASBE 39IFRS 13
Fair value definitionExit price notionExit price notion – converged
Hierarchy structureThree levelsThree levels – converged
A GENUINELY thoroughly CONVERGED standard – ONE of the MOST closely ALIGNED, UNIFIED measurement FRAMEWORKS within the ENTIRE ASBE suite.
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Statement Mapping
Where every fair value measurement lands
EventStatement(s) affectedNotes
Any fair value measurementVaries by underlying itemThe methodology is uniform; the effect follows the item's own governing standard
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Related Standards
Cross-reference map
StandardConnection
ASBE No. 22Recognition and Measurement of Financial Instruments – a primary consumer of this Standard's fair value framework
ASBE No. 20Business Combinations – relies on this Standard's methodology for acquisition accounting
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Quick-Reference Glossary
Fair value hierarchy
A three-level classification, from observable to unobservable inputs, indicating the reliability of a fair value measurement.
Principal market
The market with the greatest volume and level of activity for a particular asset or liability, forming the basis for fair value measurement.
Financial statement key (Chinese GAAP / ASBE terminology)
BS Balance Sheet (资产负债表)
IS Income Statement (利润表)
SCOE Statement of Changes in Owners' Equity (所有者权益变动表)
CFS Cash Flow Statement (现金流量表)
History & Development
2006-02
ASBE No. 39 Fair Value Measurement issued
Operative for periods beginning on or after 1 February 2007