Fair value hierarchy
Financial Dictionary — IFRS
Definition
A framework categorizing fair value measurements into Levels 1, 2, and 3.
Use cases, Example & Why it matters
Use cases
- Used when applying IFRS/IAS requirements for recognition, measurement, presentation, or disclosure.
- Used to justify accounting treatments in working papers and financial statement notes.
- Used to justify accounting treatments in working papers and financial statement notes.
Example
- Example: When preparing year-end reporting, management applies **Fair value hierarchy** to determine the correct IFRS treatment and disclosures.
Why it matters
- Why it matters: Ensures compliance with IFRS, improves comparability across periods and entities, and reduces financial reporting risk.