12 Questions
What approach has been used to value investments in equity and preference shares included in Level 3 of the fair value hierarchy?
Cost approach
Why has the cost of unquoted equity instruments been considered as an appropriate estimate of fair value?
Wide range of possible fair value measurements and cost represents the best estimate within that range
How is the fair value of borrowings determined for those with a quoted market price in an active market?
Based on its market price which is categorized as Level 1
How is the fair value of borrowings estimated for those without an active market or are unquoted?
By discounting the expected future cash flows using a discount rate equivalent to the risk-free rate of return adjusted for credit spread, categorized as Level 2
What are the financial assets and liabilities included in Level 1 of the hierarchy?
Quoted equity shares and mutual funds
What types of inputs are used to measure financial assets and liabilities in Level 2 of the hierarchy?
Observable inputs other than quoted prices
What characterizes the valuation techniques used in Level 3 of the hierarchy?
Significant unobservable inputs
What type of investments are included in Level 3 of the hierarchy?
Unquoted equity shares and preference shares
What are the financial assets as at March 31, 2022?
Cash and bank balances, Trade receivables, Investments, Derivatives, Loans, Other financial assets
How are investments in mutual funds and derivative instruments classified?
Mandatorily classified as fair value through the consolidated statement of profit and loss
What does the fair value hierarchy provide an analysis of?
Financial instruments measured subsequent to initial recognition at fair value, grouped into Level 1 to Level 3
What are the financial liabilities as at March 31, 2022?
Trade payables, Borrowings other than lease obligations, Derivatives, Other financial liabilities
Test your knowledge on fair value hierarchy, investment valuation, and the cost approach for valuing equity and preference shares. This quiz covers topics such as the use of cost as an estimate of fair value, fair value measurements, and valuation of borrowings with quoted market prices.
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