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ACCA Strategic Professional · Strategic Business Reporting (International) · Fair value measurement

Zeta plc holds a liability to deliver a commodity and cannot settle it before maturity. Under IFRS 13 Fair Value Measurement, which assumption must Zeta use when measuring the fair value of this liability?

IFRS 13 requires a liability to be measured as if it were transferred to a market participant on the measurement date, with the obligation continuing rather than being settled or extinguished. The fair value is therefore an exit (transfer) price, not carrying amount or original proceeds.

  1. AThe liability is settled with the counterparty at its carrying amount on the measurement date
  2. BThe liability is extinguished through cancellation at the cheapest cost available to Zeta
  3. CThe liability is transferred to a market participant on the measurement date, and the liability remains outstanding so the transferee fulfils the obligationCorrect
  4. DThe liability is settled by Zeta at the amount it originally received when it was incurred

Explanation

IFRS 13 measures a liability at the price that would be paid to transfer it to a market participant at the measurement date, assuming the non-performance risk is the same and the obligation remains outstanding. It is an exit price from the liability's perspective, not a settlement at carrying amount or original proceeds.

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