Fair Value (Fair Price) – Definition

Fair Value (also called Fair price in countries like Canada) is a finance/economic concept defined as a unbiased and rational estimate of the potential market of an asset (or service) taking into account certain factors.

Fair Value factors include risk, replacement costs, production costs (including cost of capital).

In Accounting terms, Fair Value Accounting is used to estimate the market value of an asset for which a market price cannot be determined for one reason or another. Fair value is not used for assets carried at historical costs.

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