Fair value
Fair value is a market-based exit price: the price receivable for selling an asset or payable for transferring a liability in an orderly transaction between market participants at the measurement date. It reflects market-participant assumptions rather than the entity’s special plans. Fair value is used only where the applicable accounting requirements require or permit it.
Worked example
An observable orderly market selling price for a comparable asset can support a fair value estimate, adjusted for relevant differences.
Common mistake
Fair value is not automatically historical cost, replacement cost, net realisable value or the value the asset has uniquely to its owner.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FA | Direct | September 2026–June 2027 |
| ACCA | K1 | Direct | July 2027–August 2028 |
| FIA | FFA | Direct | September 2026–June 2027 |