- 8 Marks
CR – Nov 2016 – L3 – Q4b -Fair Value Measurement (IFRS 13)
Determine the principal market and fair value measurement for product sales in the Lagos and Accra markets.
Question
One of the companies formally operating in Nigeria that had recently relocated its operations to Ghana, as a result of the challenging business environment in Nigeria, has access to both the Lagos and Accra markets for its product. The product sells at slightly different prices (in naira) in the two active markets. An entity enters into transactions in both markets and can access the price in those markets for the product at the measurement date as follows:
| Lagos Market (N’000) | Accra Market (N’000) | |
|---|---|---|
| Sale Price | 260 | 250 |
| Transaction Cost | (30) | (10) |
| Transport Cost | (20) | (20) |
| Net Price Received | 210 | 220 |
Required:
i. Briefly explain the principal market of an asset in accordance with IFRS 13 and determine what fair value would be used to measure the sale of the above product if the Lagos market were the principal market. (4 Marks)
ii. How is fair value determined in the absence of a principal market, and what fair value would be used to measure the sale of the above product if no principal market could be identified? (4 Marks)
Find Related Questions by Tags, levels, etc.
- Tags: Asset Valuation, Fair Value, IFRS 13, Most Advantageous Market, Principal Market
- Level: Level 3