Fair Value Basis

Definition

When referring to the valuation of a business or business assets, the fair value basis is defined as a potential transfer price between a specific buyer and seller, both parties possessing full knowledge of all the relevant facts to make their decision in accordance with their respective objectives.

What It Means

The fair value of a business differs from its market value or fair market value in that it is established by a pair of specific market participants. This may well differ from a hypothetical business buyer and seller that are assumed under the fair market value standard.

Fair value is one of the key bases of value defined under the International Valuation Standards.

See Also