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

Narmada Infra wants to measure an asset at fair value at 31 March. Dealer quotes are: an orderly sale at that date would realise Rs 90 lakh; the price at which Narmada bought it six months ago was Rs 100 lakh; the price the entity would like to obtain eventually is Rs 105 lakh; and a quote from a creditor forcing an immediate distress sale is Rs 70 lakh. Which statement is consistent with Ind AS 113?

Fair value is Rs 90 lakh because Ind AS 113 requires the price received in an orderly transaction between market participants at the measurement date. A past purchase price, the entity's hoped-for price and a distress-sale quote do not satisfy that definition.

  1. AFair value is Rs 105 lakh, as it reflects the entity's desired selling price
  2. BFair value is Rs 100 lakh, as the purchase price six months ago is the best evidence
  3. CFair value is Rs 90 lakh, as it is the price in an orderly transaction between market participants at the measurement dateCorrect
  4. DFair value is Rs 70 lakh, as the lowest price is the most prudent

Explanation

The definition focuses on the price received in an orderly transaction between market participants at the measurement date, i.e. Rs 90 lakh. The earlier purchase price is not at the measurement date. The desired price is entity-specific, and the Rs 70 lakh distress quote is not an orderly transaction. Prudence is not the test.

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