Appendix A of AASB 13 Fair Value Measurement defines fair value as:
A) The amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction.
B) The price that would be paid to purchase an asset or transfer a liability.
C) A transaction that assumes exposure to the market for a period before the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets or liabilities; it is not a forced transaction (e.g. a forced liquidation or distress sale).
D) The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Question

Quizplus · Accepted Answer

Option D correctly defines fair value as the price at which an asset could be sold or liability transferred in an orderly transaction between market participants at the measurement date. Option A defines fair value as the amount at which an asset could be exchanged or liability settled between knowledgeable, willing parties in an arm’s length transaction, which is similar to option D but does not take into account market participants. Option B is incorrect because fair value is not the price that would be paid to purchase an asset or transfer a liability, but rather the price at which it could be sold or transferred. Option C is also incorrect because it describes an ideal transaction that is not always possible in practice, and fair value should be measured based on actual market conditions.

Appendix a of AASB 13 Fair Value Measurement Defines Fair