Skip to content

CA Final · Financial Reporting · Ind AS 113 Fair Value Measurement

Himalaya Textiles Ltd holds a machine and is measuring its fair value at the reporting date under Ind AS 113. Which of the following best describes the objective of the measurement as defined in the Standard?

Fair value is 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 is a market-based exit price, not historical cost, a forced-sale price or entity-specific value in use.

  1. AThe price that would be received to sell an asset in an orderly transaction between market participants at the measurement dateCorrect
  2. BThe amount the entity originally paid to acquire the asset, adjusted for depreciation up to the measurement date
  3. CThe price the entity itself expects to receive if it sells the asset in a forced liquidation within the next year
  4. DThe present value of the cash flows the entity expects to earn from using the asset in its own business

Explanation

Ind AS 113 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 is an exit price, not a historical cost figure. The forced-liquidation option is wrong because the transaction must be orderly, and the entity-specific use option ignores the market participant perspective.

Did you get it right without looking?

One question tells you little. A timed set on Ind AS 113 Fair Value Measurement shows your real accuracy, how long you take and where you lose marks.

Practise Ind AS 113 Fair Value MeasurementFree diagnostic mock

More Ind AS 113 Fair Value Measurement questions