Ind AS 113 Fair explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Ind AS 113 provides a single framework for measuring fair value across all Ind AS. It defines fair value as an exit price, sets out valuation approaches, and establishes a three-level hierarchy of inputs with extensive disclosures — but it does not decide when fair value must be used.
Overview
Ind AS 113, Fair Value Measurement, notified under the Companies (Indian Accounting Standards) Rules, 2015, standardises the meaning and mechanics of fair value that were previously scattered across many standards. When another standard (such as Ind AS 109, 40 or 16 revaluation model) requires or permits fair value, Ind AS 113 tells you how to arrive at it and what to disclose.
Scope and Definition
Fair value is an exit price — the price to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. It is a market-based measurement, not entity-specific. The standard applies broadly but excludes share-based payments (Ind AS 102), leases (Ind AS 116) and measures that resemble but are not fair value (such as net realisable value under Ind AS 2).
Measurement Framework
Measuring fair value requires the entity to identify the asset or liability, the principal (or most advantageous) market, and — for non-financial assets — the highest and best use. Fair value uses the price in the principal market, the market with the greatest activity for the item, regardless of whether the entity can actually transact there.
Valuation Techniques and Hierarchy
| Level | Inputs | Example |
|---|---|---|
| Level 1 | Quoted prices in active markets for identical items | Listed equity share price |
| Level 2 | Other directly or indirectly observable inputs | Yield curve, comparable transactions |
| Level 3 | Unobservable inputs | Internal cash flow forecasts, private-company DCF |
Entities apply the market, cost or income approach, maximising observable inputs. The level in the hierarchy is determined by the lowest-level input that is significant to the entire measurement.
Worked Example
A company holds 10,000 listed shares quoted at ₹250 on the principal exchange at the reporting date. Fair value = 10,000 × ₹250 = ₹25,00,000, a Level 1 measurement. Separately, it values an unlisted equity stake using a discounted cash flow model with an internally estimated growth rate; because the key input is unobservable, that ₹8,00,000 valuation is a Level 3 measurement requiring detailed disclosure of the technique and sensitivity to the unobservable inputs.
Presentation and Disclosure
Disclosures let users assess the valuation techniques and inputs used and, for Level 3 measurements, the effect on profit or loss and OCI. Recurring Level 3 items require a reconciliation of opening to closing balances and a sensitivity analysis. The hierarchy classification of each item measured at fair value must be disclosed.
Key Points to Remember
Ind AS 113 does not create new fair value requirements; it harmonises measurement. Fair value is an exit price, market-based, and for non-financial assets reflects highest and best use. The hierarchy is about the observability of inputs — not the valuation technique — and it drives the intensity of disclosure.