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

Tarang Industries Ltd needs a fair value for a cash-generating unit. No information shows that market participants would use different assumptions. The finance team prepares a cash flow forecast using the entity's own data. How does Ind AS 113 classify this forecast?

It is a Level 3 input. Ind AS 113 gives a financial forecast built from the entity's own data for a cash-generating unit as a Level 3 example, provided no reasonably available information shows market participants would use different assumptions.

  1. ALevel 3 inputCorrect
  2. BLevel 2 input
  3. CLevel 1 input
  4. DOutside fair value measurement as it is value in use

Explanation

Ind AS 113 lists a financial forecast of cash flows or profit developed using the entity's own data as a Level 3 input for a cash-generating unit, where no reasonably available information suggests market participants would use different assumptions. Option D confuses this with value in use, which the standard says is not fair value; here the forecast is an input to a fair value technique.

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