1 NEED TO KNOW IFRS 13 Fair Value Measurement
2 2 IFRS 13 FAIR VALUE MEASUREMENT TABLE OF CONTENTS 1. Introduction 4 2. Scope, effective date and transition When to apply fair value measurement Scope exclusion measurement and disclosures Scope exclusions disclosures only Examples of the scope of IFRS Effective date and transition 6 3. Rationale for a fair value standard 7 4. Main definitions Fair value Market participant Orderly transaction Principal market and most advantageous market Highest and best use Unit of account Transport costs Measurement key factors and considerations The asset or liability Exit price vs. entry price The market concept Market participant The price Fair value at initial recognition Non-financial assets Liabilities and own credit risk (including equity issued by the entity) Bid and ask prices Premium and discount Valuation techniques Fair value hierarchy Level 1 inputs Level 2 inputs Level 3 inputs 54
3 IFRS 13 FAIR VALUE MEASUREMENT 3 8. Disclosures Convergence with US GAAP IASB Educational material Unquoted equity instruments within the scope of IFRS Definitions Definitions IFRS Appendix A Example IFRS 13 disclosures for 31 December
4 4 IFRS 13 FAIR VALUE MEASUREMENT 1. INTRODUCTION IFRS 13 Fair Value Measurement was issued by the International Accounting Standards Board (IASB) on 12 May The objectives of IFRS 13 (IFRS 13.1) are to: Define fair value Provide a single set of requirements for measuring fair value (for scope exclusions, see section 2.2 below) Specify the disclosure requirements for fair value measurement. IFRS 13 does not specify when items are to be measured at fair value measurements. Those requirements are included in other IFRSs. Certain IFRSs require or permit specific items to be measured at fair value: At each reporting date (fair value on a recurring basis) In other certain instances, e.g. impairment (fair value on a non-recurring basis) or at initial recognition. IFRS 13 applies to all financial and non-financial items with limited scope exclusions. Some IFRSs require fair value disclosures for items measured at (amortised) cost, and IFRS 13 provides the specific disclosure guidance for each of these. The fair value measurement project started as part of the convergence project between the IASB and the US Financial Accounting Standards Board (FASB). The outcome is that IFRS 13 is by and large comparable to the fair value measurement standard in US GAAP (Accounting Standard Codification topic 820).
5 IFRS 13 FAIR VALUE MEASUREMENT 5 2. SCOPE, EFFECTIVE DATE AND TRANSITION 2.1. When to apply fair value measurement IFRS 13 Fair Value Measurement applies when another IFRS requires or permits either (IFRS 13.5): Fair value measurements, and/or Disclosures about fair value measurements. In developing IFRS 13, the International Accounting Standards Board (IASB) reviewed all pre-existing requirements regarding fair value measurements and disclosures contained within other IFRSs. As a result, almost all of these pre-existing requirements are now included within the scope of IFRS 13 (see below) Scope exclusion measurement and disclosures The measurement and disclosure requirements of IFRS 13 do not apply (IFRS 13.6) to: Share-based payment transactions within the scope of IFRS 2 Share-based Payment Leasing transactions within the scope of IAS 17 Leases Measurements that appear similar to fair value, but which are not the same, such as: Net realisable value in IAS 2 Inventories Value in use in IAS 36 Impairment of Assets. BDO comment IFRS 2 and IAS 17 both use the term fair value in a way that differs in certain respects from the definition of fair value in IFRS 13. Therefore, when applying the fair value measurement in respect of transactions within the scope of IFRS 2 and IAS 17, an entity must apply the requirements of those standards and not the requirements of IFRS Scope exclusions disclosures only The disclosure requirements of IFRS 13 do not apply (IFRS 13.7) to: Plan assets measured at fair value in accordance with IAS 19 Employee Benefits Retirement benefit plan investments measured at fair value in accordance with IAS 26 Accounting and Reporting by Retirement Benefit Assets for which recoverable amount is fair value less costs of disposal in accordance with IAS 36. BDO comment As a consequence of the introduction of IFRS 13, the disclosure requirements of IAS 36 in respect of fair value less cost of disposal have been enhanced.
6 6 IFRS 13 FAIR VALUE MEASUREMENT 2.4. Examples of the scope of IFRS 13 As noted above, IFRS 13 does not establish which items are to be measured and/or disclosed at fair value, with these requirements being included in other IFRSs. Examples are: Loans and receivables: Although these are measured after initial recognition at amortised cost, they are within the scope of IFRS 13. This is because IAS 39 Financial Instruments: Recognition and Measurement requires them to be recognised initially at fair value, as well as disclosure of fair value being required at each subsequent reporting date (if this is materially different from the amortised cost carrying amount) Fixed assets which are subsequently measured in accordance with the revaluation model in IAS 16 Property, Plant and Equipment are within the scope of IFRS 13 in terms of both measurement and disclosure Revenue is within the scope of IFRS 13 regarding measurement (as IAS 18 Revenue paragraph 9 requires revenue to be measured at the fair value of the consideration received or receivable), but not regarding disclosures Investment property, regardless of whether this is measured in accordance with the fair value model or the cost model under IAS 40 Investment Property. Even when the cost model is followed, investment property is within the scope of IFRS 13, as IAS 40.79(e) requires fair value to be disclosed (therefore requiring measurement) Effective date and transition IFRS 13 applies for annual periods beginning on or after 1 January 2013 with early adoption permitted (IFRS 13.C1). It is applied prospectively as of the beginning of the annual period of the initial application. Prior period comparative information is not restated (IFRS 13.C2). The disclosure requirements of IFRS 13 do not need to be applied to the comparative information provided for periods beginning before the date of the initial application IFRS 13 (IFRS 13.C3).
7 IFRS 13 FAIR VALUE MEASUREMENT 7 3. RATIONALE FOR A FAIR VALUE STANDARD In its early days, IFRS often required historical cost as the basis for the measurement of items recognised in the financial statements, in some cases with an option of fair value measurement. The Conceptual Framework for Financial Reporting (and the former Framework for the Preparation and Presentation of Financial Statements) did not support fair value as the sole measurement attribute. Through the years, many published IFRSs have included a requirement, or option, for entities to measure or disclose the fair value of assets, liabilities or their own equity instruments. Because these requirements were included in each individual IFRS, they became dispersed and in many cases did not articulate a clear and consistent measurement or disclosure objective. Some IFRSs contained limited guidance about how to measure fair value, while others contained extensive guidance. These inconsistencies contributed to diversity in practice resulting in reduced comparability among different entities financial statements. The introduction of IFRS 13 Fair Value Measurement, while not interfering with the scope of fair value measurement, aims to reduce the extent of this diversity and inconsistency.
8 8 IFRS 13 FAIR VALUE MEASUREMENT 4. MAIN DEFINITIONS 4.1. Fair value Fair value is (IFRS 13.9): 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. This definition of fair value is sometimes referred to as an exit price. BDO comment The IFRS 13 Fair Value Measurement definition of fair value is somewhat different to the definition that existed in previous individual IFRSs. However, it does have some similarities with standards that have been published in the last few years, such as IFRS 3 Business Combinations which includes the following definition (IFRS 3 Appendix A): The amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm s length transaction. However, one key difference between the IFRS 13 and IFRS 3 definitions relates to liabilities: IFRS 13: refers to the transfer of a liability IFRS 3: refers to the settlement of a liability. This could lead to difference in the measurement of fair value (see below). Other differences exist between the two definitions, but they are unlikely to cause significant measurement differences, for example: IFRS 13 specifies an orderly transaction (see below), which in practice is usually how liabilities would be settled The IFRS 3 definition relates to the transaction and to the parties, but this is merely part of the term market participants in the IFRS 13 definition (see below).
9 IFRS 13 FAIR VALUE MEASUREMENT Market participant IFRS 13 Appendix A notes that market participants are buyers and sellers in the principal (or most advantageous) market for the asset or liability that have all of the following characteristics: (a) They are independent of each other, i.e. they are not related parties as defined in IAS 24 Related Party Disclosures, although the price in a related party transaction may be used as an input to a fair value measurement if the entity has evidence that the transaction was entered into at market terms (b) They are knowledgeable, having a reasonable understanding about the asset or liability and the transaction using all available information, including information that might be obtained through due diligence efforts that are usual and customary (c) They are able to enter into a transaction for the asset or liability (d) They are willing to enter into a transaction for the asset or liability (i.e. they are motivated, but not forced or otherwise compelled, to do so). BDO comment The characteristics within the definition of a market participant clarify certain aspects of the previous definition, such as: The expression knowledgeable parties is clarified by characteristic (b) The expression willing parties is clarified by (d) The expression in an arm s length transaction is clarified by (a) in the definition above.
10 10 IFRS 13 FAIR VALUE MEASUREMENT 4.3. Orderly transaction IFRS 13 Appendix A notes that an orderly transaction is: A transaction that assumes exposure to the market for a period before the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets or liabilities; it is not a forced transaction (e.g. a forced liquidation or distress sale). BDO comment IFRS 13 assumes that the transaction price reflects the price that would apply in the normal course of business, and therefore in an orderly transaction : The seller is engaged in marketing activities that are usual and customary for such a transaction (i.e. it is not a forced liquidation or distressed sale). Therefore the subsequent price agreed is the maximum price receivable in consideration for the asset The buyer, having made efforts to understand the value from his perspective (such as performing due diligence), subsequently determines the maximum price they are willing to pay. The following therefore would not be considered orderly transactions under IFRS 13: A transaction that was entered and performed in a relatively short time, which is not sufficient to carry on marketing activities and due diligence efforts that are usual and customary for transactions involving such items There is only one potential buyer for the item The seller is compelled to enter into and complete the transaction (for example, due to financial requirements or regulatory instruction) Principal market and most advantageous Principal market (IFRS 13 Appendix A): The market with the greatest volume and level of activity for the asset or liability. Most advantageous market (IFRS 13 Appendix A): The market that maximises the amount that would be received to sell the asset or minimises the amount that would be paid to transfer the liability, after taking into account transaction costs and transport costs (IFRS 13.A). BDO comment The principal (or most advantageous) market is specific to each entity. It is possible that two different entities will establish two different markets as their principal (or most advantageous) market for the same item. This is because one entity will have access to a different principal (or most advantageous) market for the same item. For example, two subsidiaries in the same group might sell the same item, but the principal market for each of them might be their own domestic market.
11 IFRS 13 FAIR VALUE MEASUREMENT Highest and best use IFRS 13 Appendix A notes that highest and best use (HBU) is: The use of a non-financial asset by market participants that would maximise the value of the asset or the group of assets and liabilities (e.g. a business) within which the asset would be used. BDO comment HBU relates to non-financial assets only. This is because, unlike other items (such as liabilities and financial assets), nonfinancial assets can be used or exploited within several different models, for example: Held for own use Leased to others Sold. If held for use, it can be used either: On its own Used together with other assets or other assets and liabilities. For example, a specialised item of property, plant and equipment might have little value on its own, but have significant value when used with other assets.
12 12 IFRS 13 FAIR VALUE MEASUREMENT 4.6. Unit of account IFRS 13 Appendix A notes that unit of account is: The level at which an asset or a liability is aggregated or disaggregated in an IFRS for recognition purposes. BDO comment IFRS 13 does not establish the unit of account to be used, and instead requires inputs to valuation techniques to be consistent with the characteristics of the asset or liability that market participants would take into account when setting a price. The unit of account may be established in the applicable IFRSs that require or permit fair value measurement, but this is not always the case. For example, when determining the fair value of an entity s investment in equity instruments (e.g. shares held in another entity), the unit of account may be either: Each individual instrument (i.e. the total fair value would be equal to the fair value of each share (P) multiplied by the number of shares held (Q) (i.e. P x Q)) The holding as a whole (i.e. the total fair value may be determined by including a control premium). At its March 2013 meeting, the board of the IASB discussed the unit of account issue due to a number of questions which had been raised by constituents. The IASB tentatively decided that the unit of account for investments in subsidiaries, joint ventures and associates is the investment as a whole. However, the majority of board members (but not all) also tentatively agreed that the fair value measurement of an investment composed of quoted financial instruments should be equal to (P x Q). This was on the basis that quoted prices in an active market provide the most reliable evidence of fair value. Those board members that did not agree indicated their tentative intention to present an alternative view on the issue in the forthcoming Exposure Draft. The IASB s discussions have continuing during the remainder of In its November 2013 public statement on European common enforcement priorities for 2013 financial statements, the European Securities and Markets Authority noted that: The standard [IFRS 13] recognises that, in some cases, an adjustment (premium or discount) will be made to inputs observable in the market (e.g. a control premium when measuring the fair value of a controlling interest). However, the same paragraph states that fair value measurement shall not incorporate a premium or discount that is inconsistent with the unit of account relevant for that item. As the IASB is currently discussing the matter, ESMA expects issuers to disclose clearly their analysis regarding unit of account, until the standard is clarified Transport costs IFRS 13 Appendix A notes that transport costs are: the costs that would be incurred to transport an asset from its current location to its principal (or most advantageous) market.
13 IFRS 13 FAIR VALUE MEASUREMENT MEASUREMENT KEY FACTORS AND CONSIDERATIONS 5.1. The asset or liability Fair value measurement is specific to each asset or liability. Consequently, fair value measurement needs to take into account the specific characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date, for example (IFRS 13.11): The condition, location and restrictions (if any) on the sale or use of the asset. IFRS 13 Fair Value Measurement illustrative examples IE28 and IE29 provide examples relating to the impact of restrictions imposed on assets, and the effect of those restrictions should market participants take them into consideration when pricing (i.e. fair valuing) the asset. A key point is that, if they are to affect the fair value measurement, any restrictions must apply to the asset itself. Restrictions that apply to the entity that holds the asset are not taken into account, because a potential purchaser would not be subject to those restrictions.
14 14 IFRS 13 FAIR VALUE MEASUREMENT The following examples are based on IFRS 13.IE28 and 29: Example 5.1(a): restriction on the sale of an equity instrument (of another entity) An entity holds an equity instrument of another entity (a financial asset) for which sale is restricted (legally or contractually) for a specified period. Such a restriction could, for example, limit a sale to only qualifying investors. The restriction is a characteristic of the instrument and, therefore, would be transferred to market participants (who will purchase it). In this case, the fair value of the instrument would be measured on the basis of the quoted price for an otherwise identical unrestricted equity instrument of the same issuer that trades in a public market, adjusted to reflect the effect of the restriction. The adjustment would reflect the amount which market participants would demand due to the risk relating to the inability to access a public market for the instrument for the specified period. The adjustment will vary depending on all the following: a) The nature and duration of the restriction b) The extent to which buyers are actually limited by the restriction (e.g. there might be a large number of qualifying investors) c) Qualitative and quantitative factors specific to both the instrument and the issuer. Example 5.1(b): Restrictions on the use of an asset A local government contributes land in an otherwise developed residential area to a commercial entity, which is constructing a hotel on the land. The local government specifies that a hotel must continue to be located on the land in perpetuity, as long as the commercial entity owns the land and hotel. Upon review of relevant documentation, the commercial entity determines that the responsibility to meet the restriction would not be transferred to market participants who might purchase the land and hotel. Consequently, the restriction on the use of the land is specific to the entity. Furthermore, the entity is not restricted from selling the land and hotel. Without the restriction on the use of the land, it could be used as a site for residential development. In addition, the land is subject to an easement (a legal right that enables a utility entity to run power lines across the land). An analysis of the effect on the fair value measurement of the land arising from the restriction and the easement is as follows: a) Government s restriction on use of land: as the restriction on the use of the land is specific to the entity, because the restriction would not be transferred to market participants. Therefore, the fair value of the land would be the higher of its fair value used in conjunction with a hotel and its fair value as a site for an alternative use such as residential development, regardless of the restriction on the use of the land by the commercial entity. For further discussion regarding the concept of highest and best use (HBU) see below b) Easement for utility lines: as the easement for utility lines is specific to (a characteristic of) the land, it would be transferred to market participants with the land. Therefore, the fair value measurement of the land would take into account the effect of the easement, regardless of whether the HBU is as a hotel or as a site for an alternative use.
15 IFRS 13 FAIR VALUE MEASUREMENT Exit price vs. entry price IFRS 13 Appendix A makes a distinction between an entry price and an exit price. When an asset is acquired or a liability is assumed in an exchange transaction, the transaction price is the amount: Paid to acquire the asset, or Received to assume the liability. This amount is the entry price. In contrast, the fair value of the asset or liability (under IFRS 13) is the amount that would be: Received to sell the asset, or Paid to transfer the liability. This amount is the exit price. Entities do not necessarily sell assets at the prices paid to acquire them. Similarly, entities do not necessarily transfer liabilities at the prices received to assume them. The difference between the two values may (or may not, depending on the applicable guidance) lead to the recognition of a day one gain or loss (see below).
16 16 IFRS 13 FAIR VALUE MEASUREMENT 5.3. The market concept One of the major principles of IFRS 13 is the market concept (i.e. reference in IFRS 13 to market participants, market conditions, market transactions, market information, principal market, most advantageous market ). Also, IFRS 13.2 notes that: Fair value is a market-based measurement, not an entity-specific measurement. Fair value is the price obtained from selling an asset (or paid for transferring a liability) in transaction that takes place in either (IFRS 13.16): The principal market, or The most advantageous market (where no principal market exists). In order to establish the principal (or the most advantageous) market, an entity needs to evaluate potential markets. IFRS states that an entity does not have to undertake an exhaustive search to find the principal (or the most advantageous) market. Nevertheless, all information that is available must be considered. Where there is no information to the contrary, the market in which the entity usually transacts for the item is presumed to be the principal (or the most advantageous) market. Once an entity identifies the principal market, the fair value must be measured in that market, even if another market (or markets) exist that are more advantageous (IFRS 13.18). Only in the absence of a principal market (i.e. all potential markets have the same volume and level of activity for the item, or the volume and level of activity cannot be established) is the entity required to identify the most advantageous market. In addition, the potential market must be accessible as at measurement date (IFRS 13.19). Markets that are not accessible as at measurement date must not be considered in determining the principal (or the most advantageous) market. It should be noted, that the entity does not have to demonstrate an ability to sell a particular asset (or transfer a particular liability) at the measurement date to illustrate accessibility (IFRS 13.20). The process of identifying the most advantageous market takes into account transaction costs and transportation costs. For non-financial assets, where the asset s location/proximity to market participants is a relevant consideration, the associated transport costs are likely to be reflect in the market price set by market participants. However (in terms of fair value measurement) they are not a characteristic of the item, because transaction costs: Do not affect the determination of fair value Are accounted for under other applicable IFRSs.
17 IFRS 13 FAIR VALUE MEASUREMENT 17 Example 5.3(a): Identifying the principal (or the most advantageous) market Assume that two markets exist for commodity A, where location is one of the characteristics of the item. Entity B normally transacts commodity A in market X. Nevertheless, Entity B also gathered available information regarding the volume and level of activity of market Y. Market X Market Y Volume (annual, in millions CU) Transactions (per day) Price (at period end, CU) Transport costs (CU) (6) (2) Potential fair value (CU) Transaction costs (CU) (2) (4) Net proceeds (CU) Figure 1: Example 5.3(a) Market data Entity B takes into account all reasonable available information regarding markets X and Y. Accordingly, because it has been able to obtain the information, it establishes that market Y is the principal market as this market has the highest volume and level of activity. As a result, the fair value of commodity A is CU95 (transaction costs are not incorporated in deriving fair value in a principal market). It should be noted that: Once a principal market is established, the fact that other markets may be more advantageous is ignored The presumption that the principal market is the one in which the entity normally transacts is not always appropriate Transaction costs in the principal market are accounted for in accordance with other applicable IFRSs and do not form part of the fair value calculation (see also example 5.3(d)).
18 18 IFRS 13 FAIR VALUE MEASUREMENT Example 5.3(b): Identifying the principal (or the most advantageous) market The facts are the same as in example 5.3(a), except that the information regarding the volume and level of activity in markets X and Y is not available, and therefore Entity B is unable to determine which market is the principal market. Consider the following scenarios: a) Assume no change to transaction costs per example 5(a) b) Assume that the transaction costs in market X have risen by CU2 to CU4 (there is no change to the transaction costs in market Y). Scenario a) Assume no change to transaction costs in example 5(a) The most advantageous market is the market that maximises the net proceeds, after incorporating transaction costs. In this scenario market X has net proceeds totalling CU92, while market Y has net proceeds totalling CU91. Therefore market X is the most advantageous market, and the fair value is therefore CU94 (although transaction costs have been taken into account in establishing the most advantageous market, fair value still excludes transaction costs). Scenario b) Assume transaction costs have risen to CU4 in market X The most advantageous market is the market that maximises the net proceeds, after incorporating transaction costs. In this scenario market X will have net proceeds totalling CU90 (after accounting for a CU2 increase in transaction costs), while market Y has net proceeds totalling CU91. Therefore market Y is now the most advantageous market, and the fair value is therefore CU95. Example 5.3(c): Market accessibility A commodity trader entity has a 31 December year end. The entity also issues quarterly interim financial reports. One of the interim period end dates (30 June) traditionally falls on holiday. The entity is transacting in the marketplace whenever it is open for trade. Due to the public holiday the marketplace is closed at the measurement date (i.e. 30 June), and therefore no transactions take place at that date. However, the fact that the market is not active at the reporting date, does not, in itself, preclude the market for being including when the commodity trader entity is considering which is its principal (or the most advantageous) market. BDO comment It can be demonstrated that due to accessibility (or lack thereof), different entities will have different principal (or the most advantageous) market. Consider a commercial entity, engaging with a bank for a derivative. While the bank can trade the specific derivative on the dealer market (inter-bank market), that market is not accessible to the commercial entity. Another example may arise where an importer may sell large proportion of its imported goods (such as cars) to several large leasing entities at a substantial discount in comparison with prices charged to others. The leasing entities are contractually required to use the importer as their sole supplier and, consequently, the market available to the importer is not accessible by others.
19 IFRS 13 FAIR VALUE MEASUREMENT 19 Example 5.3(d): Interest rate swap at initial recognition (based on IFRS 13.IE24-26) Entity A (a retailer) enters into an interest rate swap in a retail market with Entity B (a bank) for no initial consideration (i.e. transaction price is zero). Entity A can access only the retail market. Entity B can access both the retail market (as it did with Entity A) and the interbank market (i.e. with bank counterparties). From the perspective of Entity A, the retail market is the principal market for the swap. If Entity A were to transfer its rights and obligations under the swap, it would do so with a dealer counterparty in that retail market. In that case the transaction price (zero) would represent the fair value of the swap to Entity A at initial recognition, i.e. the price that Entity A would receive to sell or pay to transfer the swap in a transaction with bank counterparty in the principal market. That price would not be adjusted for any incremental (transaction) costs that would be charged by that bank counterparty. From the perspective of Entity B, the interbank market is the principal market for the swap. If Entity B was to transfer its rights and obligations under the swap, it would do so with a bank in that market. Because the market in which Entity B initially entered into the swap is different from the principal market, the transaction price (zero) would not necessarily represent the fair value of the swap to Entity B at initial recognition. If the fair value differs from zero, Entity B has a day 1 gain or loss (for the recognition of day 1 gains or losses, see the discussion below).
20 20 IFRS 13 FAIR VALUE MEASUREMENT 5.4. Market participant The above discussion regarding the market in which an entity may transact is sometimes theoretical as many items are rarely bought or sold on a standalone basis. Moreover, many liabilities include restrictions that prevent their transfer. Even then, fair value measurement is still made from the perspective of market participant. For example, when measuring the fair value of customer-related intangible assets acquired in a business combination that is accounted for in accordance with IFRS 3 Business Combinations, the acquirer considers types of potential market participants (e.g. a financial investor, or a competitor). As there may be no apparent exit market for a customer relationship intangible asset, management may consider whether there are strategic buyers that would benefit from the customer relationships. It is common for entities to build up their customer base in correlation with efforts made to expand their business. Hence, the entity can identify potential participants in its industry, assuming that the market participant is acting to enhance its business activities, and from there determine hypothetical market participants. An entity should make assumptions that are consistent with a market participant s (economic) perspective. That is, a market participants interest is to maximise the price received on selling assets and to minimise the price paid to transfer liabilities. IFRS notes that the process of considering potential market participants need not relate to specific market participants. Instead an entity should develop a profile of potential market participants. The profile should consider factors specific to the asset or liability, the principal (or most advantageous) market for the asset or liability, and market participants with whom the entity would transact with in that market. In accordance with the definition in IFRS 13.A, market participants are considered to be knowledgeable regarding the asset or liability being valued. For this to be the case, market participants will usually perform various procedures (e.g. due diligence) within a reasonable period allowed by the seller. The seller itself is a market participant, and in order to achieve an orderly transaction (refer section 4.3) must allow for marketing activities that are usual and customary for transactions involving such item. BDO comment The completion of due diligence by a potential buyer is also essential to the seller, as the seller will not accept a price deduction due to potential buyer not receiving all relevant information.