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

On 31 March, Kaveri Textiles Ltd holds a machine. A market participant would pay ₹48 lakh for it in an orderly transaction on that date. Kaveri's own buyer quote was ₹52 lakh, and it would incur ₹2 lakh transport cost to take the machine to the buyer's site, which is not part of the machine's characteristics. Under Ind AS 113's definition of fair value, what is the fair value of the machine?

Fair value is ₹48 lakh. Ind AS 113 defines it as the price received to sell an asset in an orderly transaction between market participants at the measurement date, so the entity's own quote and its transport costs are not used.

  1. A₹48 lakhCorrect
  2. B₹52 lakh
  3. C₹50 lakh
  4. D₹46 lakh

Explanation

Fair value is the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date, which here is ₹48 lakh. Kaveri's own quote of ₹52 lakh is entity-specific and not a market participant price. Deducting transport cost to reach ₹46 lakh or averaging to ₹50 lakh has no basis in the definition.

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