Fair value is determined on the basis of the current market value. In other words Fair value is an estimated price at which an asset can be sold or a liability settled in an arm's length transaction to a third party under current market conditions.
The above definition can be broken into following parts :
1.Current market conditions: Fair value should be based on current market conditions and not on some earlier presumptions
2.Arm's length transaction: Fair value should be derived on the basis of arm's length transaction .Arm's Length transaction means where none of the party are under the influence of the other
3.Estimated price : Fair value is just an estimation which is made on the measurement date. As the market keeps fluctuating the fair value also fluctuates.
How is "fair value" determined? What is the usual basus for fair value? Please explain in...
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