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CMA Final · Corporate Financial Reporting · Fair Value Measurement (Ind AS 113)

Ind AS 113 defines fair value as the price that would be paid to transfer a liability. Sahyadri Ltd owes a supplier Rs 25 lakh payable in the normal course. A market participant would take over the obligation for Rs 24 lakh in an orderly transaction at the reporting date. Sahyadri originally recorded it at Rs 25 lakh. On this basis, the fair value of the liability is:

The fair value of the liability is Rs 24 lakh. Ind AS 113 measures a liability at the price that would be paid to transfer it in an orderly transaction between market participants at the measurement date, regardless of the Rs 25 lakh originally recorded.

  1. ARs 1 lakh
  2. BRs 24 lakhCorrect
  3. CRs 25 lakh
  4. DRs 49 lakh

Explanation

For a liability, fair value is the price that would be paid to transfer it in an orderly transaction between market participants at the measurement date, which is Rs 24 lakh. The recorded Rs 25 lakh is the original carrying amount, not the transfer price. Rs 1 lakh is merely the difference between the two.

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