Fair value on the balance sheet: what CFOs rely on

When a fair value reaches the balance sheet, the CFO owns it. The number may have been produced by an external valuer or an internal team, but the sign-off — and the conversation with the audit committee, the auditor and the market — belongs to the finance function. Two sets of standards stand behind that conversation, and knowing what each one does is part of being entitled to rely on either.

What IFRS 13 does — and what it does not

IFRS 13 sets the principles for measuring fair value for financial reporting. The International Valuation Standards (IVS), maintained by the IVSC, address something different: how valuations are performed. Under the Statement of Protocols between the IFRS Foundation and the IVSC, each body retains sole responsibility for its own standards; IFRS 13 does not adopt IVS. The two are complementary rather than interchangeable. The accounting standard tells preparers what the measurement objective is; the valuation standards describe a disciplined process for meeting it. A finance function that understands the boundary can hold each document to the right test.

The process behind the number

The IVS comprise General Standards covering the valuation framework, scope of work, bases of value, valuation approaches, data and inputs, valuation models, and documentation and reporting, alongside Asset Standards for businesses, intangible assets, non-financial liabilities, inventory, plant equipment and infrastructure, real property interests, development property and financial instruments. For a CFO commissioning a valuation, that structure doubles as a due-diligence checklist. A valuation conducted under IVS should be able to show its scope, its basis, its inputs and its reasoning — which is precisely the trail a preparer needs when the estimate is questioned months later.

A framework with reach

Reliance is also easier when the framework is widely shared. A valuation prepared under IVS in one jurisdiction is built on the same structure as one prepared in another — a quiet advantage for groups whose balance sheets span borders.

The figures come from the IVSC’s global adoption and membership pages. For a preparer, the practical consequence is consistency: subsidiaries, advisers and auditors in different markets can work from a common reference point.

What markets actually price

Fair value reporting is one half of a dialogue; what investors make of the underlying business is the other. An IVSC paper drawn from a keynote by DBS Group CFO Chng Sok Hui at the IVAS–IVSC Business Valuation Conference in Singapore examines how digitalisation, culture and capital management translate into outcomes that markets can price — with relevance beyond banking to valuation, reporting and investment more broadly. The lesson for preparers is direct: the credibility of a reported value rests on whether the drivers behind it can be articulated, internally and externally.

Three habits of defensible reporting

Three features recur in defensible reporting. The scope of work and basis of value are agreed before the engagement starts, not after the draft arrives. The provenance of inputs is known — which data came from inside the business, and what was done to corroborate it; in less liquid or harder-to-observe markets this is where estimates are won or lost. And reliance is documented: where specialists contributed, the report says so explicitly. None of this requires a CFO to become a valuer. It requires knowing what a well-run valuation looks like.