Fair Value Principle
Accounting glossary · Understand, connect, apply
Fair value is a market-based measurement: broadly, the price to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date.
Example
A quoted investment may be measured using its market price when the applicable standard requires fair value.
Remember the difference
Fair value is not the amount a particular owner hopes to receive. Not all assets and liabilities are measured at fair value.
Examples are simplified for learning. Where a term depends on US law, IFRS, US GAAP or a historical rule, check the context explained above and the requirements relevant to your course.
Study references: OpenStax financial accounting and managerial accounting. For reporting requirements, consult the applicable IFRS Standards or FASB guidance. US tax terms should be checked against the relevant tax-year IRS instructions.
← Return to the accounting glossary