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

Vihan Textiles Ltd holds 10,000 equity shares of Kaveri Ltd, which are listed and actively traded on the National Stock Exchange. Under Ind AS 113, which statement best describes the NSE as a source of inputs for valuing these shares?

The NSE is an exchange market. Ind AS 113 states that closing prices in an exchange market are readily available and generally representative of fair value, so the closing price is the natural input for the listed shares. Dealer, brokered and principal-to-principal markets work differently.

  1. AIt is a dealer market, where bid and ask prices are more readily available than closing prices
  2. BIt is an exchange market, where closing prices are readily available and generally representative of fair valueCorrect
  3. CIt is a brokered market, where brokers match buyers and sellers without holding inventory
  4. DIt is a principal-to-principal market, where transactions are negotiated with no intermediary

Explanation

Ind AS 113 gives the National Stock Exchange as the example of an exchange market. In such a market closing prices are readily available and generally representative of fair value. The dealer-market option describes over-the-counter markets, where bid and ask prices are more readily available than closing prices.

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