What is Fair value?
The market price of an asset or liability. NAS No. 5 defines it as follows: "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". The key point: fair value looks not at how much money the company spent on the asset, but at how much the market would give for it today. In fixed asset accounting it is used in several places: the initial cost of a fixed asset received free of charge (as a gift) is determined on the basis of fair value; if the revaluation method is chosen, a fixed asset is carried at an amount based on its fair value at the revaluation date; an unrecorded fixed asset found during a stocktake is also measured at the fair value of similar assets.
Source: 5-son BHMS, 3-band; 5-son BHMS, 19-band; 5-son BHMS, 28-band; 5-son BHMS, 61-band