Fair Value

Fair value is one of the important concepts of finance. It is also known as fair price. This concept is equally important both for finance and economics. Through the fair value concept, one can have a clear idea about the would-be price of different commodities, properties and various services.
In other words, fair value can also be termed as a definite amount of the related asset or commodity at which the same could be purchased or exchanged in any transaction that is taking place at present time. For providing the present value of all the above-mentioned things, several factors are considered seriously by the fair value concept.

Some of these factors are the cost of production, cost of distribution, related risk factors, the subjective value of the same, the replacement charge and many more.Fair value is also very essential for accounting. The fair value is consulted to decide adequate market value of a certain commodity or a particular property.

The fair value is used in case of those things that have no active market. The values of these types of assets depend on a particular type of estimate known as mark-to-market process.
The market price and the fair value are related to each other. In a market, that is lucid enough, the fair value price and the market price of a particular commodity remain almost same. But at the same time, if there is lack of information about the factors necessary to bring out the fair vale, the value is going to differ from the market price.

A set of guidelines related to the accounting of fair value was introduced in 2004 by the Financial Accounting Standard Board. These guidelines are very important for the tabulation of several financial reports. By following these guidelines, the market fair value of properties as well as of liabilities can be estimated quite easily. Earlier, there was no guideline regarding the calculation of fair values and because of this, a number of inconsistencies were found in the process.

More Information Related to Finance Theory
Finance Concepts Debt Interest Rate
Public Finance Mortgage Loan Discount
Long Terms Financing Yield Curve Arbitrage
Finance Services Company Arbitrage Pricing Credit Derivative
Binomial Options Pricing Model Capital Asset Pricing Model Cox Ingersoll Ross Model
Black Model Black Scholes Model Chen Model
Liquidity Risk Commodity Risk Consumer Credit Risk
Systemic Risk Currency Risk Market Risk
Interest Rate Risk Settlement Risk Equity Risk
Gordon Model Monte Carlo Option Model Ho Lee Model
Rendleman Bartter Model Vasicek Model Hull White Model
Rational Choice Theory Modern Portfolio Theory Cumulative Prospect Theory
Efficient Market Hypothesis Arrow Debreu Model International Fisher Effect
Floating Currency Financial Risk Management Hyperbolic Discounting
Personal Budget Floating Exchange Rate Discount Rate

Last Updated on : 1st July 2013

This website is up for sale at $20,000.00. Please contact 9811053538 for further details.