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

Kaveri Pharma Ltd must measure the fair value of a liability it owes under a decommissioning obligation. Which description matches the Ind AS 113 definition of fair value as applied to a liability?

For a liability, Ind AS 113 fair value is the price that would be paid to transfer the liability in an orderly transaction between market participants at the measurement date. It is a transfer price, not a settlement amount, an undiscounted expected cost or a prior carrying 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 counterparty at the earliest date
  3. CThe undiscounted amount the entity expects to spend on the obligation
  4. DThe carrying amount of the liability in the previous balance sheet

Explanation

The definition says fair value is the price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. The settlement option describes a different concept, a settlement with the counterparty, not a transfer to a market participant. Undiscounted expected spend and prior carrying amount are not the definition.

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