fair value refers to the amount of purchase, sale or settlement of an asset or liability when it is currently traded between two willing parties, rather than forced sales.
the biggest feature of fair value is that it comes from a fair market, and it is the * * * knowledge reached by rational parties who participate in market transactions after fully considering the market information. This market transaction price that reaches the * * * knowledge is the allowable value.
How to determine the fair value:
1. Securities are determined according to the current net realizable value;
2. Accounts receivable and notes receivable are determined according to the amount expected to be collected in the future, discounted at the actual interest rate at that time, minus the estimated bad debt loss and collection cost;
3. The inventory of finished products and commodities shall be determined according to the estimated selling price minus the liquidation expenses and reasonable profits;
4. In-process product inventory shall be determined according to the estimated product selling price after completion minus the costs, liquidation expenses and reasonable profits to be incurred at the time of completion;
5. raw materials are determined according to the current replacement cost;
6. Fixed assets should be treated according to different situations: the fixed assets that can still be used are priced according to the current replacement cost of fixed assets with similar production capacity, unless it is expected that the use of these assets will have lower value to the purchasing enterprise in the future; For fixed assets that will be sold or held for a period of time (but not used) before being sold, they can be valued at net realizable value.
Extended information:
Judgement method of fair value:
In any of the following three cases, the fair value of the assets exchanged in or out can be reliably measured:
1. There is an active market for the assets exchanged in or out, and the fair value is determined based on the market price.
2. There is no active market for the assets exchanged in or out, but there is an active market for the same or similar assets. The fair value shall be determined based on the market price of the same or similar assets.
3. There is no comparable trading market for assets of the same kind or similar assets, and the fair value is determined by valuation technology. When using valuation technology to determine fair value, it is required that the variation range of the fair value estimate determined by this valuation technology is very small, or all kinds of probabilities used to determine the fair value estimate can be reasonably determined within the variation range of the fair value estimate.
Reference: Baidu Encyclopedia-Fair Value