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Can you please help me explaining the market value and fair value. Are they the same thing?
Secondly please explain the factors that affect the market value and fair value?
Hi,
You should take a look at IFRS 13 that covers the definition of fair value, which is in he class notes. This is effectively the market price of the item but goes into more depth regarding whether there is a market for the item to be traded and what to do if there isn’t a market. It looks at a three stage model to establish the fair value.
Thanks
In other words, you are saying that market value is effectively the fair value (they both refer to the same thing) but fair value by definition has more depth because it has three stage model and so.
BUT when we say fair value in consolidation then we actually mean the market value of the asset in the stock exchange?
Is it also true that fair value is actually the ‘estimated’ price of an asset at the time of sale (which is effectively the market price)?
Yes, that is correct with regards to the fair value and market value. So, the fair value of a trader equity share would be its current market value. IFRS 13 then goes on to give more depth if there is no market for that share with its stage 2 and stage 3 fair value estimations.
Hope that’s cleared it all up for you.
Thanks
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