The IFRS fair value hierarchy is the version of the fair value hierarchy set out in IFRS 13 Fair Value Measurement, the standard that defines fair value across International Financial Reporting Standards. The main entry explains the concept and its three levels in general; this entry notes how it appears under IFRS.
IFRS 13, effective from 2013, defines fair value as 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. It ranks the inputs to valuation techniques. Level 1 inputs are unadjusted quoted prices in active markets for identical items. Level 2 inputs are other inputs that are observable, directly or indirectly, such as prices of similar items or interest rate curves. Level 3 inputs are unobservable. A measurement is placed in the level of the lowest-ranked input that is significant to it.
The hierarchy applies wherever another standard requires or permits fair value, including financial instruments under IFRS 9 and property under IAS 40. Entities disclose the level of each class of measurement, transfers between levels and, for Level 3, the inputs used and a reconciliation of movements. The hierarchy underpins fair value accounting.