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

Vindhya Ltd values a business cash-generating unit using a financial forecast of cash flows built from its own data. No reasonably available information suggests market participants would use different assumptions. Which treatment follows Ind AS 113?

The forecast is a Level 3 input. Ind AS 113 lists a financial forecast of cash flows or profit developed from the entity's own data as Level 3 for a cash-generating unit, when nothing indicates that market participants would use different assumptions.

  1. AThe forecast is a Level 3 inputCorrect
  2. BThe forecast is a Level 2 input because it is based on entity data
  3. CThe forecast is a Level 1 input because it is internally consistent
  4. DThe forecast must be rejected as it is not a fair value input

Explanation

Ind AS 113 gives the cash-generating unit as an example of a Level 3 input: a financial forecast developed using the entity's own data when no reasonably available information indicates that market participants would use different assumptions. Entity-based data is unobservable, so it cannot be Level 1 or 2. Inputs may be observable or unobservable, so it is not rejected.

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