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

Meera Industries has an asset with these figures at the measurement date: price in an orderly sale to market participants Rs 92 lakh; cost Rs 120 lakh; carrying amount Rs 100 lakh; price entity's management would like to receive Rs 110 lakh. An analyst proposes each as fair value. Which figure meets the Ind AS 113 definition, and what is the difference between it and the carrying amount?

Fair value is Rs 92 lakh, the price from an orderly transaction between market participants at the measurement date. Against the carrying amount of Rs 100 lakh, it is Rs 8 lakh lower. Cost and management's desired price are not exit prices.

  1. ARs 92 lakh; fair value is Rs 8 lakh lower than carrying amountCorrect
  2. BRs 110 lakh; fair value is Rs 10 lakh higher than carrying amount
  3. CRs 120 lakh; fair value is Rs 20 lakh higher than carrying amount
  4. DRs 92 lakh; fair value is Rs 8 lakh higher than carrying amount

Explanation

Fair value is the orderly-transaction price between market participants at the measurement date: Rs 92 lakh. Carrying amount is Rs 100 lakh, so 100 - 92 = Rs 8 lakh lower. The last option has the correct figure but the wrong direction. Management's desired price and cost are not market exit prices.

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