CMA Final · Corporate Financial Reporting · Fair Value Measurement (Ind AS 113)
Sagar Textiles Ltd holds a machine. At the reporting date, an orderly sale between market participants would fetch Rs 48 lakh. The machine cost Rs 60 lakh, has a carrying amount of Rs 40 lakh, and its value in use to Sagar is Rs 52 lakh. What is the fair value of the machine under Ind AS 113?
The fair value is Rs 48 lakh, because Ind AS 113 defines fair value as the price received to sell an asset in an orderly transaction between market participants at the measurement date. Cost, carrying amount and the entity's value in use are not exit prices and are ignored.
- ARs 40 lakh
- BRs 48 lakhCorrect
- CRs 52 lakh
- DRs 60 lakh
Explanation
Fair value is the price received to sell an asset in an orderly transaction between market participants at the measurement date, which is Rs 48 lakh. Cost (Rs 60 lakh) is an entry price, carrying amount (Rs 40 lakh) is an accounting figure, and value in use (Rs 52 lakh) is entity-specific, so none of these is fair value.
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