Fair value
Financial Dictionary — Financial Reporting
Definition
The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.
Detailed Explanation
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Common Uses
- Used to prepare and present financial statements and disclosures.
- Used when classifying items and explaining accounting impacts to users of the financials.
- Used when classifying items and explaining accounting impacts to users of the financials.
Practical Example
- Example: During financial statement preparation, **Fair value** guides how information is presented and disclosed.
Why This Term Matters
- Why it matters: Enhances transparency, improves comparability, and reduces misunderstanding by stakeholders.