(a) Fair value I
Fair value is an exit price in the principal market.
There is a presumption that the principal market is the one in which the entity would normally enter into a transaction to sell the asset or transfer the liability unless there is evidence to the contrary.
In the absence of a principal market, it is assumed that the transaction would occur in the most advantageous market.
This is the market which would maximise the amount which would be received to sell an asset or minimise the amount which would be paid to transfer a liability, taking into consideration transport and transaction costs.
The most advantageous market is identified using the selling price net of transaction costs and transport costs.
The price used to measure fair value must not be adjusted for transaction costs, but should consider transportation costs.

Market A is the most advantageous market.
Fair value of the vehicles = 150 vehicles × GH¢39,600 = GH¢5,940,000.

(b) Fair value II

The principal market is the one with the highest volume and level of activity. It is not determined based on the volume or level of activity of the reporting entity’s transactions in a particular market but is based on the total size of the market.

Market B is the principal market.

Fair value of the vehicles = 150 vehicles × GH¢39,700 = GH¢5,955,000.

(c) Park land

The park land should be valued at its highest and best use.

The highest and best use takes into account the use of the asset, which is physically possible, legally permissible and financially feasible. The highest and best use of a non-financial asset is determined by reference to its use and not its classification and is determined from the perspective of market participants. It does not matter whether the entity intends to use the asset differently. IFRS 13 allows management to presume that the current use of an asset is the highest and best use unless market or other factors suggest otherwise.

The restriction on the use of the land would not be passed on sale therefore a market participant would not take it into account in arriving at a fair value. The rights of the water company are a characteristic of the land which would be taken into account by market participants.

Therefore the fair value of the park land is its market value if it were to be developed for residential purposes less the costs incurred to protect the rights of the water company giving a figure of GH¢1,600,000 (GH¢2,000,000 – GH¢400,000).