Skip to content

CA Final · Financial Reporting · Ind AS 113 Fair Value Measurement

Sagar Pharma Ltd must report the fair value of a liability it owes. Four statements were made by team members about the measurement basis in Ind AS 113. Which one is consistent with the Standard's definition?

For a liability, fair value under Ind AS 113 is the price that would be paid to transfer it in an orderly transaction between market participants at the measurement date. It is a current transfer price, not the historic amount or the entity's own settlement preference.

  1. AFair value of a liability is the price that would be paid to transfer it in an orderly transaction between market participants at the measurement dateCorrect
  2. BFair value of a liability is the amount the entity would pay to settle it at its own convenience in the future
  3. CFair value of a liability is its carrying amount in the books at the previous reporting date
  4. DFair value of a liability is the price received when the liability was first incurred, never updated

Explanation

Ind AS 113 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. So for a liability it is a transfer price at the measurement date. The other options rely on settlement convenience, historic carrying amount or original price, none of which is in the definition.

Did you get it right without looking?

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

Practise Ind AS 113 Fair Value MeasurementFree diagnostic mock

More Ind AS 113 Fair Value Measurement questions