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What is Fair Market Value vs Fair Value?

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0 2024-01-21T10:45:28+00:00
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Fair

value vs

market value are terms used in the context of valuation, and they can have specific meanings in different accounting and financial reporting frameworks.

I am explaining the

difference between fair value and market value below:

Fair Market Value (FMV)

FMV is the price at which property, goods, or services would change hands between a willing buyer and a willing seller, both having reasonable knowledge of the relevant facts, and neither being under any compulsion to buy or sell.

It is often used in tax-related matters, such as determining the value of property for income tax purposes, calculating capital gains tax, or establishing the value of assets in estate planning.

Fair Value

Fair value is a broader concept that encompasses various valuation methods and may include estimates based on market prices, present value calculations, and other relevant factors. It is often used in financial reporting and accounting standards.

It is used in financial reporting to represent the estimated worth of an asset or liability. In India, accounting standards such as Ind AS (Indian Accounting Standards) provide guidelines for determining fair values in financial statements.

This is the main difference between

fair value vs market value

.

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