Skip to content

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

Kaveri Textiles holds a machine. On 31 March, a market participant would pay Rs 40 lakh to buy it in an orderly transaction. Kaveri paid Rs 52 lakh for it two years ago, its carrying amount is Rs 44 lakh, and a forced sale today would fetch Rs 33 lakh. Under the Ind AS 113 definition, the fair value of the machine on 31 March is:

The fair value is Rs 40 lakh, because Ind AS 113 defines fair value as the price received to sell an asset in an orderly transaction between market participants at the measurement date. Cost, carrying amount and a distressed forced-sale price do not meet that definition.

  1. ARs 52 lakh
  2. BRs 44 lakh
  3. CRs 40 lakhCorrect
  4. DRs 33 lakh

Explanation

Fair value is the price received to sell an asset in an orderly transaction between market participants at the measurement date, which is Rs 40 lakh. Rs 52 lakh is the historical cost and Rs 44 lakh is the carrying amount. Rs 33 lakh is a forced-sale price, which is not an orderly transaction.

Did you get it right without looking?

One question tells you little. A timed set on Fair Value Measurement (Ind AS 113) shows your real accuracy, how long you take and where you lose marks.

Practise Fair Value Measurement (Ind AS 113)Free diagnostic mock

More Fair Value Measurement (Ind AS 113) questions