Susan Maina is a content writer at Mugo and Company, where she simplifies Accounting, Auditing, and Forensic Audit services with her finance expertise.
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If you prepare financial statements in Kenya – whether you’re running an SME, managing an NGO, or heading finance in a corporate – sooner or later, someone will ask you:
“What’s the fair value of this land, these shares, or this loan liability?”
That’s where IFRS 13 in Kenya steps in.
It’s the global standard that explains how to measure fair value — basically, the “today price” of your assets and liabilities.
Now, here’s why it matters:
Because many businesses still rely on book value (This is the original cost you paid for an asset, minus depreciation).
But book value doesn’t always match today’s reality.
For example, your books may show a delivery van at KSh 1.2M, while in Nairobi’s market it might fetch only KSh 900K.
That difference is what IFRS 13 helps you deal with – giving donors, investors, and regulators numbers that reflect today’s market, not just yesterday’s receipts.
At Mugo & Co, we’ve put together this simple guide to make IFRS 13 in Kenya easy to understand and apply.
Let’s jump in.
Not sure how IFRS 13 applies to your assets or liabilities?
Talk to our IFRS experts today.
Book your First Consultation For FreeThink of IFRS 13 as the “fair price” rulebook.
It asks: “If you had to sell an asset (or transfer a liability) today, in a fair and open market, what price would you get?”
It’s not the price you paid years ago, and it’s not your dream selling price. It’s the current, market-based exit price.
Fair value measurement means you measure your assets and liabilities using market-based evidence, not just accounting history or what you paid for them years ago.
It’s not about the historical price you paid years ago. It’s about reflecting today’s economic reality.
Let’s say you bought a piece of land in Kiambu back in 2010 for KSh 5 million.
Fast forward to today, and similar plots are going for around KSh 20 million.
According to IFRS 13, the fair value isn’t the old 5 million you paid years ago – it’s the 20 million you could realistically get if you sold it in today’s market.
That’s the essence of fair value in IFRS 13: showing what your assets (or liabilities) are worth right now.
The journey of IFRS 13 didn’t happen overnight.
| Year | Occurrence |
|---|---|
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Back in 2005
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The International Accounting Standards Board (IASB) started developing global rules on fair value measurement.
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By 2011
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The standard — IFRS 13 — was officially issued.
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2013 |
Kenya adopted IFRS 13 through ICPAK.
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From that point on, any organisation in Kenya reporting under full IFRS – think banks, insurers, listed companies, and many corporates – has been required to apply IFRS 13.
IFRS 13 applies whenever another IFRS requires fair value measurement or disclosure.
It doesn’t create new fair value rules — it just explains how to measure.
IFRS 13 Covers:
financial instruments, investment property, biological assets, business combinations, impairment tests.
IFRS 13 Excludes:
share-based payments (IFRS 2), leases (IFRS 16), employee benefits (IAS 19).
Think of it as the “fair value manual” that other IFRS standards borrow from.
When you’re measuring fair value, IFRS 13 doesn’t leave you guessing. It gives you three clear roads you can take:
| Type of IFRS 13 Valuation Approach | What It Entails | Best For | Example |
|---|---|---|---|
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Market Approach
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Use actual market prices.
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– Assets and liabilities that are actively traded in liquid markets – (e.g., listed shares, government bonds, commodities). |
Quoting Safaricom shares directly from the NSE.
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Income Approach
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Estimate the future cash flows an asset will bring, then discount them back to today’s value.
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– Assets that generate income over time, – such as investment property, private businesses, or long-term financial instruments. |
Valuing a rental apartment in Westlands based on monthly rent.
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Cost Approach
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Ask yourself: “How much would it cost to replace this asset right now?”
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– Physical or specialised assets that don’t have an active market, – like equipment, infrastructure, or custom-built machinery. |
Valuing a delivery truck by checking the price of a new one.
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In short: IFRS 13 tells you to pick the approach that best mirrors today’s economic reality for the asset you’re measuring.
Get Expert IFRS 13 Valuation Support
Book your First Consultation For FreeWhen you’re trying to figure out the fair value of something, not all information is equally reliable.
That’s why IFRS 13 – Fair Value Measurement created a “fair value hierarchy” – a ranking system to show you how strong your evidence is.
Here’s how it works:
| IFRS 13 Hierarchy Levels | Example |
|---|---|
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Level 1 – Direct Market Prices (Most Reliable)
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– Example: Safaricom shares listed on the NSE. – You just read today’s price — no guesswork. |
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Level 2 – Indirect Market Inputs (Middle Ground)
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– Example: Using government bond yields to estimate the value of a corporate bond.
– There’s no direct price, but you use data from similar or related items. |
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Level 3 – Your Own Assumptions (Least Reliable)
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– Example: A unique office building in Upper Hill. – No one is selling a similar one, so you make your best estimate. |
Rule of thumb: Always start with Level 1 if available, then move down only if you must.
In short: Levels 1, 2, and 3 are simply a way of ranking how strong your asset valuation evidence is – from solid market prices (Level 1) to educated guesses (Level 3).
We’ll help you build reliable assumptions and disclosures that auditors and regulators trust.
Book your First Consultation For FreeSo, what exactly does IFRS 13 ask you to do in Kenya? Here are the big rules:
| Key Provisions of IFRS 13 in Kenya | Description |
|---|---|
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1. Define fair value properly.
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– IFRS 13 says fair value is the “exit price” — the price you’d get if you sold an asset – (or paid to transfer a liability) in a normal, orderly transaction today. |
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2. Use market evidence first.
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– Always look for real market data before making your own assumptions. – The closer you are to an actual price, the better. |
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3. Disclose your methods.
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– Tell people how you got your numbers — whether you used the market, income, or cost approach.
– Donors, investors, and regulators don’t just want the final figure; they want the story behind it. |
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4. Classify your inputs.
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– Every input you use has to be slotted into Level 1, Level 2, or Level 3 of the fair value hierarchy – (direct prices, indirect prices, or assumptions). |
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5. Be transparent.
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– The goal of IFRS 13 is trust.
– By showing your methods and assumptions clearly, you give stakeholders confidence that your numbers reflect today’s economic reality. |
In short: IFRS 13 is not just about coming up with a number — it’s about proving where it came from and how reliable it is.
Let Mugo & Co. guide you through disclosures and audit-ready fair value reporting.
Book your First Consultation For FreeIFRS 13 in Kenya doesn’t just want you to calculate fair value — it wants you to show your working so that others can trust your numbers.
Here’s what you need to disclose:
| Type of IFRS 13 Disclosure Requirement | Explanation |
|---|---|
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1. The valuation method you used.
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– Did you rely on the market approach, income approach, or cost approach?
– Stakeholders want to know the path you took. |
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2. The input levels.
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– Was it Level 1 (direct prices), Level 2 (market-based estimates), or Level 3 (your own assumptions)? – This tells people how reliable the number is. |
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3. Extra details for Level 3.
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– If you used assumptions (Level 3), you need to do a sensitivity analysis – basically, show how much the value would change if your assumptions changed. |
Why does this matter?
Because investors, donors, auditors, and regulators don’t just want the number itself – they want to understand how you got there and how much confidence they should place in it.
You fall under IFRS 13 in Kenya if you prepare full IFRS financial statements.
That usually means:
In short: if you’re big enough to attract investors, donors, or regulators, you’re expected to play by IFRS 13 rules.
Let Mugo & Co. guide you through IFRS 13 reporting.
Book your First Consultation For FreeYou don’t need to apply full IFRS 13 if you:
In short: smaller SMEs using IFRS for SMEs get lighter rules, while the big players must use IFRS 13.
| Example 1: Rental Building (Income Approach) | Example 2: Safaricom Shares (Market Approach) |
|---|---|
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Your company owns a rental apartment block in Nairobi. – Step 1: Pick a Valuation Approach → Income approach (because it earns rent). – Step 2: Estimate Cash Flows → Rent is KSh 1.2 million per year. – Step 3: Discount to Today’s Value → Using a 10% rate, fair value is about KSh 12 million. You report KSh 12 million, not what it cost to build years ago. |
Your company owns 10,000 Safaricom shares. – Step 1: Pick a Valuation Approach → Market approach (shares are actively traded). – Step 2: Get Market Price → NSE shows Safaricom trading at KSh 15 per share. – Step 3: Multiply → 10,000 × 15 = KSh 150,000. You report KSh 150,000, the market price today. |
First, what’s a transaction cost under IFRS 13?
It’s the extra money you spend to buy or sell an asset – like broker fees, stamp duty, or legal fees.
Think of it as the “side expenses” of doing the deal, not the price of the asset itself.
Now, here’s what IFRS 13 – Fair Value Measurement says:
Example in Kenya:
| Area | What IFRS 13 Says | Kenya Example |
|---|---|---|
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Fair Value
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– Think of it as the price you’d get today if you sold the asset.
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– A plot in Kiambu valued at today’s going rate.
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Valuation Approaches
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– You’ve got three options: Market, Income, or Cost.
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– NSE shares (Market) – rental flats (Income) – delivery truck (Cost). |
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Hierarchy
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IFRS 13 uses a “ladder of trust” for inputs: – Level 1 (most reliable), – Level 2, – Level 3 (least reliable). |
– Safaricom shares (L1) – bonds (L2) – unique Upper Hill building (L3). |
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Transaction Costs
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– Ignore extra costs like broker or legal fees — unless transport changes the value.
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– Skip NSE broker fees – but include maize transport from Eldoret to Nairobi. |
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Disclosure
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– Always explain how you got your number: – method, inputs, and (for Level 3) what happens if assumptions change |
– Add details in your notes to the accounts.
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Kenya adopted IFRS 13 in 2013 through ICPAK.
Since then, all listed companies, banks, insurers, and large Corporates in Kenya must comply. SMEs using IFRS for SMEs are exempt.
Q1. What is IFRS 13 in very simple terms?
It’s the accounting rulebook that explains how to figure out the today price (fair value) of your assets and liabilities.
Q2. What does Fair Value Measurement mean in IFRS 13 in Kenya?
It means valuing things based on current market evidence — not what you paid years ago, and not what you hope to sell for in future.
Q3. What is the difference between IFRS 9 and IFRS 13?
For a deeper dive into financial instruments, check out our IFRS 9 Compliance in Kenya – Guide
Q4. Is IFRS 13 applicable to all assets?
No. It only applies when another IFRS requires or allows fair value (e.g., IAS 40 for investment property, IFRS 3 for business combinations).
For Example: IFRS 3 Business Combinations, fair value is used when valuing assets acquired
Q5. Does IFRS 13 handle transaction costs?
Yes — but it excludes them from fair value (like legal fees or broker charges). The only exception is transport costs, if location affects value.
Q6. Is IFRS 13 compulsory in Kenya?
Yes, for any entity reporting under full IFRS — such as listed companies, banks, insurers, and large corporates/NGOs. SMEs using IFRS for SMEs are exempt.
At the end of the day, IFRS 13 is about making sure your financial statements reflect today’s reality, not yesterday’s prices.
Whether you’re an SME valuing machinery, an NGO reporting donor-funded assets, or a corporate disclosing investment property — getting fair value right builds credibility and trust.
Get it wrong, and you risk audit findings, penalties, or donors/investors losing confidence. Get it right, and your numbers tell a story that’s transparent, reliable, and compliant.
Work with Mugo & Company for clear, compliant disclosures in Kenya
Book your First Consultation For FreeAt Mugo & Co., we guide SMEs, NGOs, and corporates in Kenya through IFRS 13 — from fair value calculations to preparing disclosures that stand up to scrutiny from auditors, regulators, donors, or investors.
Contact us today and let’s make IFRS 13 work for you, not against you.
This guide is for general information only.
It simplifies IFRS 13 concepts for SMEs, NGOs, and corporates in Kenya.
It’s not professional advice, and specific situations may require tailored guidance.
Always consult a qualified advisor before making accounting or financial reporting decisions.
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