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

Kaveri Pharma Ltd is measuring the fair value of a liability it owes. Under the definition in Ind AS 113, the fair value of that liability is best described as:

The fair value of a liability is the price that would be paid to transfer it in an orderly transaction between market participants at the measurement date. It uses transfer language, not receipt on sale, and is not the original recognised amount or a contractual settlement amount.

  1. AThe price that would be paid to transfer the liability in an orderly transaction between market participants at the measurement dateCorrect
  2. BThe amount the entity would pay to settle the liability with the creditor on the due date, ignoring market conditions
  3. CThe price that would be received to sell the liability to a third party at the measurement date
  4. DThe original amount recognised when the liability was first incurred, regardless of the measurement date

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. Option C wrongly uses the asset wording (price received to sell). Original amount and a settlement amount ignoring market conditions are not the definition.

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