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CMA Final · Corporate Financial Reporting · Fair Value Measurement (Ind AS 113)

Under Ind AS 113, fair value is best described as:

Fair value under Ind AS 113 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, not the acquisition cost, replacement cost or a forced-sale value.

  1. AThe 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 dateCorrect
  2. BThe price an entity paid to acquire the asset, adjusted for depreciation up to the measurement date
  3. CThe amount an entity expects to receive from selling the asset in a forced liquidation within the year
  4. DThe cost of replacing the asset with a new one at the measurement date

Explanation

Ind AS 113 defines fair value as 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. Historical cost less depreciation and replacement cost are not the definition, and a forced liquidation is not an orderly transaction.

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