Before the adoption of Ind AS 113 in India, the accounting standard implemented for recognition,

measurement, amortization, impairment, and disclosure of intangible assets was AS 26 - "Intangible

Assets". AS 26 was issued by the Institute of Chartered Accountants of India (ICAI) in 2002, All entities in
India were subject to it, except for certain exempted enterprises that were granted specific exemptions
from its application.

AS 26 defined an intangible asset as an identifiable non-monetary asset without physical substance,

which an enterprise could either acquire or internally generate. The standard g the recognition of
intangible assets, which required the asset to meet certain criteria such as:

The asset must be identifiable, which means that it is separable from the enterprise or arises from
contractual or legal rights.

Save for a few exempted enterprises that were specifically granted the exemption, all entities operating
in India were bound by its provisions.

The asset should possess a cost or value that can be accurately determined.

AS 26 also provided guidance on u all costs necessary to bring the asset to its current condition and
location. Furthermore, the standard mandated that intangible assets be amortized over their useful lives
unless their useful life was deemed indefinite.

Ind AS 113, introduced in India in 2016, provides more detailed guidance on the measurement of the fair
value of assets and liabilities, including intangible assets. Ind AS 113 is based on International Financial
Reporting Standards (IFRS) 13 - "Fair Value Measurement" and aims to establish a single framework for
measuring fair value, which is defined as 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.

Moreover, the standard required intangible assets to be amortized over their useful lives, unless their
useful life was considered indefinite the standard also requires entities to disclose the methods and
significant assumptions used in determining the fair value of intangible assets.
Steps to follow –

Identify the financial instruments: The first step is to identify all financial instruments that fall under the
scope of IndAS 113. IndAS 113 applies to all financial instruments except for those that are specifically
excluded, such as certain loan commitments, insurance contracts, and lease contracts.

Determine the appropriate valuation technique: IndAS 113 allows for three valuation techniques to be
used: the market approach, the income approach, and the cost approach. The company should select
the appropriate valuation technique based on the nature of the financial instrument being valued and
the availability of relevant market data.

Determine the inputs to be used: The valuation technique selected will determine the inputs to be used
in the valuation process. These inputs can be classified into three levels based on the degree of
observability: Level 1 inputs are quoted prices in active markets; Level 2 inputs are observable market
data other than quoted prices, and Level 3 inputs are unobservable inputs based on the company's
assumptions.

Perform the valuation: Using the selected valuation technique and inputs, the company should perform
the valuation of the financial instrument to determine its fair value as of the measurement date.

Disclose the fair value: The company should disclose the fair value of all financial instruments that have
been measured at fair value in the financial statements. The disclosure should include information on
the valuation technique used, the inputs used in the valuation, and the level of the fair value hierarchy
within which the financial instrument falls.

Review and update the fair value measurement: The company should periodically review and update
the fair value measurement of its financial instruments to ensure that it remains relevant and
dependable. Changes in the valuation technique, assumptions or inputs used may be required based on
changes in market conditions, regulations, or other factors.
Sectors that are affected by IndAS 113

1. Banking and Financial Services

 Large portfolio of financial instruments
 Fair value measurement may impact financial statements and regulatory capital
requirements.

2. Insurance
 Policies involve financial instruments.
 Fair value measurement may impact financial statements and capital requirements.

3. Manufacturing
 May use financial instruments such as derivatives.
 Fair value measurement may impact financial statements and disclosures.

4. Real Estate
 May have financial instruments such as mortgages or derivatives.
 Fair value measurement may impact financial statements and disclosures.

5. Retail and Consumer Goods

 May have financial instruments such as hedging instruments and investments.
 Fair value measurement may impact financial statements and earnings.
Ind AS 113 does not prescribe a specific transaction method for measuring the fair value of intangible
assets. Instead, the standard requires entities to use the most appropriate valuation technique(s) in the
circumstances to determine the fair value of an intangible asset.

The standard provides a framework for determining the fair value of an intangible asset, which involves
three levels of inputs:

 Level 1 inputs: These are inputs that are observable for the asset or liability, such as quoted
market prices for identical assets or liabilities in active markets.

 Level 2 inputs: These are inputs other than quoted prices included in Level 1, which are
observable for the asset or liability, either directly or indirectly. For example, if there are no
quoted market prices for the asset or liability, inputs such as market prices for similar assets or
liabilities, or discounted cash flow analysis based on observable inputs, may be used.

 Level 3 inputs: These are unobservable inputs for the asset or liability, which are based on an
entity's assumptions about market participants' assumptions. For example, if there are no
observable market inputs, inputs such as cash flow forecasts or expected rates of return may be
used.

Based on these three levels of inputs, the standard provides a list of valuation techniques that may be
used to determine the fair value of an intangible asset, including:

1. Income approach: This involves estimating the future cash flows that the intangible asset is
expected to generate and discounting them back to their present value using an appropriate
discount rate.
2. Market approach: This involves using market data to determine the fair value of the intangible
asset, such as using comparable transactions or using market multiples.
3. Cost approach: This involves estimating the cost of replacing the intangible asset or reproducing
it, less any accrued depreciation.

The choice of valuation technique(s) will depend on the specific circumstances of the asset being valued,
and entities are required to use judgment to determine which technique(s) is most appropriate. The
standard also requires entities to disclose the valuation techniques used and the significant assumptions
made in determining the fair value of intangible assets.
Nestle India is a subsidiary of Nestle S.A., a Swiss multinational food and beverage company. Nestle India
is one of the leading food and beverage companies in India, with a presence in various categories such
as milk products and nutrition, beverages, chocolates, confectionery, and prepared dishes and cooking
aids. Some of Nestle India's popular brands include Maggi, Nescafe, KitKat, Milky Bar, and Nestle Milk,
among others. Maggi, a brand of instant noodles, is particularly popular in India and has become a
household name. The brand faced a temporary ban in 2015 due to allegations of excessive lead content,
but the ban was later lifted after the company complied with food safety regulations.

For the Ind AS 113 in Nestle

Nestle India uses IndAS 113 to determine the fair value of its various financial instruments, such as
derivatives, equity instruments, and debt instruments. The fair value of financial instruments is
determined using various valuation techniques, including market quotes, models based on observable
market inputs, and models based on unobservable inputs.

For example, Nestle India may use market quotes to determine the fair value of a financial instrument if
it is actively traded in a public market. However, if a financial instrument is not actively traded, the
company may use a valuation model based on observable market inputs or unobservable inputs.

To determine the fair value of its financial instruments, Nestle India may also consider other factors such
as market liquidity, credit risk, and market volatility. These factors can impact the valuation of financial
instruments and Nestle India's management must exercise judgment and make estimates when
determining fair values.

Nestle India discloses extensive information about its accounting policies for financial instruments in its
financial statements, including the valuation techniques used, the inputs used in the valuation, and the
level of the fair value hierarchy within which the financial instrument falls. The company also discloses
any significant changes in the valuation techniques used and any significant changes in the key
assumptions and inputs used in the valuation process.

In summary, Nestle India uses IndAS 113 to ensure that its financial instruments are valued fairly and
transparently. The company uses various valuation techniques and considers multiple factors when
determining the fair value of its financial instruments. It also provides extensive disclosure on its
accounting policies for financial instruments in its financial statements, which helps investors and other
stakeholders to make informed decisions.