Page 6 - 26. COMPILER QB - IND AS 113
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MTP QUESTIONS


        Q4 (August 18 – 4 Marks) – (Similar to Q6)

        An asset is sold in 2 different active markets (a market in which a transaction for the asset or liability takes
        place with sufficient frequency and volume to provide pricing information on an ongoing basis) at different
        prices.
        An entity enters into transactions in both markets and can access the price in those markets for the asset at

        the measurement date.
        In Market A:
        The sale price of the asset is Rs. 26, transaction cost is Rs. 3 and the cost to transport the asset to Market
        A is Rs. 2 (i.e., the net amount that would be received is Rs. 21).
        In Market B:
        The sale price of the asset is Rs. 25, transaction cost is Re. 1 and the cost to transport the asset to Market

        B is Rs. 2 (i.e., the net amount that would be received is Rs. 22).
        Determine the fair value of the asset by supporting your answer with proper reason.

        SOLUTION
        If Market A is the principal market for the sale of asset (i.e., the market with the greatest volume and level
        of  activity  for  the  asset),  the  fair  value  of  the  asset  would  be  measured  using  the  price  that  would  be
        received in that market, after taking into account transport cost of Rs. 24. The price in the principal (or most
        advantageous)  market  used  to  measure  the  fair  value  of  the  asset  or  liability  shall  not  be  adjusted  for

        transaction costs.
        If neither market is the principal market for the sale of assets, the fair value of the asset would be measured
        using  the  price  in  the  most  advantageous  market.  The  most  advantageous  market  is  the  market  that
        maximises the amount that would be received by selling the asset, after taking into account transport cost
        (i.e., the net amount that would be received in the respective markets).

        Since the entity would maximise the net amount that would be received for the asset in Market B, the fair
        value of the asset would be measured using the price in that market ie. sale of asset Rs. 25 less transport
        cost Rs. 2, resulting in a fair value measurement of Rs. 23.



















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