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

Sundaram Textiles Ltd holds a parcel of unlisted debentures and must report them at fair value at the reporting date. The CFO says the amount should be the price Sundaram originally paid to acquire them, since that is the 'cost to the company'. Which view is consistent with the definition of fair value in Ind AS 113?

Fair value is 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. It is an exit price at the reporting date, so the original purchase price does not automatically represent fair value.

1. AFair value is the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date, so the original purchase price is not by itself the measureCorrect
2. BFair value is always the original transaction price paid by the entity, adjusted only for inflation
3. CFair value is the price the entity would need to recover its cost plus a normal profit margin on sale
4. DFair value is the amount an entity would receive if it were forced to sell the asset immediately in a distress sale