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

Kaveri Pharma Ltd is determining the fair value of a liability. The Ind AS 113 definition of fair value refers to a price that would be paid to transfer a liability. Which feature of the definition is relevant to this measurement?

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 a transfer price viewed from market participants, not the old carrying amount or a management-negotiated settlement figure.

  1. AThe price is that which the entity would pay to settle the liability with its own creditor on the due date, ignoring market participants
  2. BThe price is the carrying amount recorded in the books at the previous reporting date
  3. CThe price is that paid to transfer the liability in an orderly transaction between market participants at the measurement dateCorrect
  4. DThe price is the amount that the entity's management considers fair after negotiation with the counterparty

Explanation

The definition covers both assets and liabilities. 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. The carrying amount option is wrong because it is a past book figure, not a measurement-date transfer price.

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