What is Fair Market Value vs Fair Value?

Hi Opal. Fair market value vs fair value can be a little tricky to deal with. However, the two do hold some differences which I will be sharing below to help you gain an understanding of the two subjects. The two mainly differ on the factors which are considered while determining them. I will also talk about the methods used to calculate both the fair value and the far market value.

Get Free Estimate

Fair Market Value and Fair Value

Here is a brief about both fair value and fair market value to give you a good understanding of the differences between the two.

Fair Value

This is the anticipated value at which an asset is traded in an open market, between a buyer and seller. The fair value is the actual value of an asset and is based entirely on the current market conditions.

Fair value has a deeper meaning related to the intrinsic value of an asset, beyond the quoted price it comes with. The fair value is dependent on the current market trends, supply and demand and any prospective growth or decline anticipated in the future. 

I am aware of a method for calculating the fair value, called the Discounted Cash Flow method. Here, the value of an asset is set by calculating the current value of its projected future cash flows. It comprises casting both inflows and outflows and then applying a discount rate to reduce them to their present value.

Fair Market Value

Talking about FMV is the value associated with an asset on the agreed-upon price between a buyer and seller. Here, the condition is that both parties have to be willing for this transaction to take place. Both have considered the value to be the best for their interests, acting independently under normal market conditions.

When it comes to the calculation of FMV, you first need to know the asset being considered. There are several factors such as liquidity, depreciation, sales and even the uniqueness of an asset, crucial to determining the fair market value.

This is all. I hope this clears the difference between fair market value and market value. 

Find the Right Value of Your Land Via Expert Due Dilligence from NoBroker!

Some related information:

How To Find Market Value of Land? 

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:

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 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

.

Read more