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

Kaveri Ltd must measure the fair value of a liability. Which statement is consistent with the definition in Ind AS 113?

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. It is not the original proceeds or a negotiated settlement amount, and the 'received to sell' wording applies to assets.

  1. AIt is the price Kaveri would receive to sell the liability to a market participant
  2. BIt is the price that would be paid to transfer the liability in an orderly transaction between market participants at the measurement dateCorrect
  3. CIt is the amount Kaveri originally received when the liability was incurred
  4. DIt is the price Kaveri would pay to settle the liability early with the creditor under negotiated terms

Explanation

The definition states fair value is the price paid to transfer a liability in an orderly transaction between market participants at the measurement date. Receiving a price applies to assets; the original proceeds are an entry price; and negotiated early settlement is not a transfer to a market participant.

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