CMA Final · Corporate Financial Reporting · Fair Value Measurement (Ind AS 113)
Sagar Textiles holds a machine. A forced-liquidation sale would fetch Rs 40 lakh, but an orderly transaction between market participants at the measurement date would fetch Rs 55 lakh. Sagar bought it for Rs 70 lakh and its carrying amount is Rs 48 lakh. Fair value under Ind AS 113 is:
Fair value is Rs 55 lakh, because Ind AS 113 uses the price received in an orderly transaction between market participants at the measurement date. The forced-liquidation price, the carrying amount and the original cost are not exit prices in an orderly transaction.
- ARs 55 lakhCorrect
- BRs 40 lakh
- CRs 48 lakh
- DRs 70 lakh
Explanation
Fair value is the price received in an orderly transaction between market participants at the measurement date, which is Rs 55 lakh. Rs 40 lakh arises from a forced sale, which is not orderly. Rs 48 lakh is the carrying amount and Rs 70 lakh is historical cost.
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