Question

What is the definition of fair value?

   What is the definition of fair value?

Intermediate Accounting

Intermediate Accounting

Donald E. Kieso,… 13th Edition

Chapter 2, Problem 14

Instant Answer

Solved by Expert Nathan Silvano

07/09/2020

Step 1

Fair value is an estimate of the market value of an asset or liability, based on the price that a buyer and seller would agree upon in an orderly transaction. Show more…

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What is the definition of fair value?

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Key Concepts

Fair Value

Fair value is a measurement of an asset’s or liability’s worth, determined based on market conditions. It represents the price at which an asset could be sold or a liability transferred between knowledgeable, willing parties in an orderly transaction at a given measurement date.

Market Participants

Market participants refer to the buyers and sellers in a market who are assumed to act in their best interests, using all relevant information, and who are capable of engaging in a transaction. Their collective behavior and available market data help in establishing a realistic fair value for the asset or liability.

Orderly Transaction

An orderly transaction implies a typical market environment where assets or liabilities change hands without pressure conditions like distress or forced sales. This concept underpins the fair value measurement, ensuring that the price reflects true market conditions rather than exceptional circumstances.

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