Which procedures would you perform to validate fair value measurements for investment properties under IFRS?

• A. Obtain external appraisals and assess inputs and assumptions.
• B. Test fair value hierarchy levels using observable inputs only.
• C. Obtain external appraisals, assess inputs and assumptions, test hierarchy levels, and compare with observable market data.
• D. Compare with historical cost only.

Answer: (C)

Validating fair value measurements for investment properties under IFRS relies on a robust, market-based approach. Start with an independent external appraisal to establish an objective value and provide an authoritative basis for the measurement. Then scrutinize the inputs and assumptions used in the valuation—rent forecasts, capitalization rates, discount rates, vacancy assumptions, market comparables, and property-specific factors—to ensure they are reasonable and aligned with current market conditions.

Next, test the valuation against the fair value hierarchy requirements, verifying that the level chosen (based on observable inputs versus unobservable ones) is appropriate and that the valuation methodology is consistent with the inputs used. Finally, corroborate the result by comparing it with observable market data such as recent sales and active market quotes for similar properties, ensuring the measurement reflects current market conditions.

This combined approach—external appraisal, careful input assessment, hierarchy testing, and market data comparison—provides a well-supported and reliable fair value measurement. Relying solely on commentary, observable inputs, or historical cost would not meet IFRS expectations for fair value validation.