CERTYNEX IFRS ACADEMY

A demand deposit of 500 is repayable immediately. A valuation technique gives 470, and the accountant uses 470 as fair value on the grounds that "the deposit earns less than the market rate". What is the error?

The deposit should be measured at 530 to reflect future interest.

He should have discounted 500 over five years before comparing.

A demand deposit is not a financial liability and therefore escapes this floor, since the depositor can withdraw it at any time.

The fair value of a demand liability is not below the amount payable on demand: here 500, payable immediately.