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Concept Paper on Fair Value by ICAI

Concept Paper on Fair Value

ICAI is the national professional accounting body of India and recently it released a Concept Paper entitled “All About Fair Value”. Fair value is considered as the guiding principle for financial reporting all over the world.

With the inclusion of Indian According Standards (Ind AS), Finance Reporting of India moves towards the fair value regime. ICAI also combined Accounting Standards with Indian Financial Reporting Standards (IFRSs). And due to all these and with the fair value measurements, it started revealing the financial figures of Financial Statements beginning from FY 2016-17.

Fair value is being used in the Indian Accounting standard and In accounting, fair value is a rational and unbiased estimate of the potential market price of a good, asset, or even service. So we can say that Fair value is the base of value concerned with the financial reporting valuation. 

READ ALSO : ICAI Permitted E-Mail mode to Communication with Retiring Auditor

The ICAI is trying to standardize the procedures, principles, and practices, which are being followed and used by registered valuers and professionals from years. For proper valuation of good, assets, and other liabilities ICAI released ICAI Valuation Standards-2018 and as per the IND AS 113 and MCA it was based on  Fair Value principles. It was also being used by the ICAI RVO which stands for ICAI Registered Valuers Organisation.

In this matter, CA. Atul Kumar Gupta, President of ICAI said “ Looking at the importance of the concept of fair value and its various aspects, it was thought to bring out a Concept Paper on “All about Fair Value” highlighting various Key aspects of Fair Value as per Ind AS 113, Consideration for determination of value based on highest and best use, where the highest and best use is different from the existing use, factors influencing Fair Value and Relevance of Exit Price in Fair Value.”.

ICAI in “All About Fair Value” represented the analytic data of around 505 companies and business houses on S&P500 to identify the data concerned to the fair value accounting since 1990. ICAI also presented the analysis report of fair value’s impact in the financial statement of Nifty since the Financial year 1989-90.

 ICAI represented this concept paper to clear that the fair value will be based on the market based and not an entity-specific measurement. It also clarified that the fair value will be based on the current condition of the market and not of the future status of the market. ICAI along with Its Registered Valuers Organization is trying to provide knowledge, support, and guidance to the Professionals, Registered Valuer, and stakeholders too.
CA. Atul Kumar Gupta added that “I am sure the Concept Paper and the empirical research of 505 Companies listed on S&P500 Nifty 50since FY 1989-90 will help the stakeholders and societies to know more about the trends and findings with regard to fair value.”

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