MFRS 13 Fair Value Measurement sets out a framework for measuring fair value in accordance with the International Financial Reporting Standard (IFRS).

Required:

An entity has a piece of land on which is situated a building that is used as a warehouse. The indicated value as currently used is RM2 million for the land and RM1 million for the factory building If the factory is demolished and the whole piece of land is used as a parking lot, the fair value of the land will be RM4.5 milion (after demolition cost of the building). Discuss the fair value measurement of the land and the warehouse. (7 marks)