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

Meru Pharma Ltd bought equipment for Rs 90 lakh on 1 April. At 31 March, the same equipment could be sold in an orderly transaction between market participants for Rs 72 lakh. A forced liquidation sale within a week would fetch only Rs 55 lakh, and the cost to replace the equipment new is Rs 110 lakh. Meru's own cash-flow estimate gives a value in use of Rs 80 lakh. At what amount is fair value measured at 31 March under Ind AS 113?

Fair value is Rs 72 lakh, the price obtainable in an orderly transaction between market participants at the measurement date. The forced-liquidation figure is not orderly, the value in use is entity-specific, and the purchase and replacement costs are entry prices rather than exit prices.

  1. ARs 55 lakh
  2. BRs 72 lakhCorrect
  3. CRs 80 lakh
  4. DRs 90 lakh

Explanation

Fair value is the exit price in an orderly transaction between market participants at the measurement date: Rs 72 lakh. Rs 55 lakh is a forced sale and not orderly. Rs 80 lakh is entity-specific value in use. Rs 90 lakh is the entry price and Rs 110 lakh is a replacement cost, neither an exit price.

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