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CMA Final · Corporate Financial Reporting · Valuation of Shares (including Determination of Goodwill)

Sahyadri Textiles holds shares listed on the National Stock Exchange and wants to find the market in which inputs are most readily observable. Under the description of exchange markets in Ind AS 113 (Appendix B), which statement is correct?

In an exchange market such as the National Stock Exchange, closing prices are readily available and generally representative of fair value. Bid and ask prices typify dealer markets, brokers matching parties describes brokered markets, and independent negotiation with little public information describes principal-to-principal markets.

  1. AClosing prices are readily available and generally representative of fair valueCorrect
  2. BOnly bid and ask prices are available, and closing prices are not
  3. CBrokers hold their own inventory and quote prices to both parties
  4. DTransactions are negotiated independently and little information is public

Explanation

Ind AS 113 states that in an exchange market, closing prices are both readily available and generally representative of fair value, and cites the National Stock Exchange as an example. Bid and ask prices are the feature of dealer markets, not exchange markets. Brokers not holding inventory describes brokered markets, and independent negotiation describes principal-to-principal markets.

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