Appendix a of AASB 13 Fair Value Measurement Defines Fair

question 22

Multiple Choice

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.

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Definitions:

Allocative Efficiency

A condition of distributing resources in which improving the situation of one person necessitates the detriment of another.

Long-Run Equilibrium

A state in which all factors of production can be adjusted, markets clear, and no economic agents have the incentive to change their behavior.

Marginal Revenue

The additional income that a business receives from selling one more unit of a good or service.

Economic Profits

The difference between total revenues and total costs, including both explicit and implicit costs.