Page 2 - 26. COMPILER QB - IND AS 113

INDAS 113 –

FAIR VALUE MEASUREMENT

(TOTAL NO. OF QUESTIONS –7)

INDEX

S.No. Particulars Page No.

1 RTP Questions 26.1

2 MTP Questions 26.5

3 Past Exam Questions 26.6

RTPs QUESTIONS

Q1 (Nov 19)

Comment on the following by quoting references from appropriate Ind AS.
i) DS Limited holds some vacant land for which the use is not yet determined. The land is situated in a
prominent area of the city where a lot of commercial complexes are coming up and there is no legal
restriction to convert the land into commercial land.

The company is not interested in developing the land to a commercial complex as it is not its business
objective. Currently the land has been let out as a parking lot for the commercial complexes around.
The Company has classified the above property as investment property. It has approached you, an expert in
valuation, to obtain fair value of the land for the purpose of disclosure under Ind AS.

On what basis will the land be fair valued under Ind AS?
ii) DS Limited holds equity shares of a private company. In order to determine the fair value of the shares,
the company used a discounted cash flow method as there were no similar shares available in the market.
Under which level of fair value hierarchy will the above inputs be classified?
What will be your answer if the quoted price of similar companies were available and can be used for fair
valuation of the shares?

SOLUTION

i) As per Ind AS 113, a fair value measurement of a non-financial asset takes into account a market
participant’s ability to generate economic benefits by using the asset in its highest and best use or by
selling it to another market participant that would use the asset in its highest and best use.
The highest and best use of a non-financial asset takes into account the use of the asset that is physically
possible, legally permissible and financially feasible, as follows:
26. 1