High inflation, sanctions pressure, exchange rate volatility, and a liquidity crisis are undermining the reliability of traditional asset valuation methods. How do companies produce credible financial reporting amid all of this?
In his recent publication for the November issue of the ‘IFRS in Practice’ journal, Stanislav Antonov, Director of Audit for High-Tech Companies at FBK, looks into the key challenges in determining fair value in the current macroeconomic climate.
The author explores how macroeconomic instability, rising discount rates, a shortage of reliable market data, and regulatory constraints affect valuation quality. Drawing on the financial statements of major Russian companies, he demonstrates how businesses are adapting their valuation approaches: by transitioning from market-based to income and cost models, implementing scenario analysis, enhancing disclosure practices, and strengthening collaboration with valuers and auditors.
‘Fair value measurement is not a technical procedure that helps to determine the value of assets and liabilities, but rather an area of professional judgement with inherent uncertainty. In an environment marked by a crisis, high inflation, and sanctions, it requires strict adherence to the hierarchy of IFRS 13, as well as the application of scenario analysis, adjustments for liquidity, risk premiums, and other assumptions, detailed disclosures, and close cooperation between valuers and auditors,’ observes the author.
If you want to learn more about applying the requirements of IFRS 13 correctly, read the full article (available now to subscribers via guest access for 3 days).
