Fair value is a term — defined by state law and/or legal precedent — that may be used when valuing business interests in shareholder disputes or marital dissolution cases. Market value is also different from fair value in the following points: 1. Fair market value is based on the market value of an asset or entity with latitude for adjustments depending on the analysis of market transaction circumstances. This article has been a guide to Fair Value vs. Market Value. Here we discuss the top 4 differences between fair and market value along with infographics and comparison table. Understanding NAV and market value The net asset value of a fund is a simple concept to understand. Fair market value and fair value are two distinct standards of value. In technical terms, FV and FMV are defined as follows: FV – In accounting terms, FV is “the amount […] Depreciation/ Impairment: Depreciation is … On the other hand, the market value of assets or anything can be defined as the value that the market has made for it. An estimate of fair market value can be based on either precedent or extrapolation. We base something’s market value or fair market value on how much it could sell for in an open market. Although the meanings are similar, they are not identical. Do not confuse the term with market value. In addition to the actual property itself, other market factors such as recently-sold properties in and around the area and supply and demand are both used to determine FMV. The model of the fair value in most of the cases is often the fundamental valuation of an asset of the company etc. Fair Value vs Market Value • Fair value and market value are measures that are frequently used when determining the value of an asset. Fair Value vs. Market Value Market value is also different from fair value in the following points: Market value fluctuates more than fair value. Fair value means the present market price that the asset can fetch. For example, if during the last three months, the value of a share in Company A was $30 and during the most recent evaluation, it went down to $20, then its market value is $20. You may also have a look at the following articles –, Copyright © 2020. However, assessed value can come up when you buy or sell a home, because this number, unlike the loosey-goosey market value, is public knowledge contained in … A willing seller and buyer should have agreed upon this value. 2. Assessed Value. Fair value is the most used term when it comes to valuing an asset. Understanding NAV and market value The net asset value of a fund is a simple concept to understand. Market value as it is determined by the supply and the demand forces often tends to fluctuate. It may be based on the most recent pricing or quotation of an asset. THE CERTIFICATION NAMES ARE THE TRADEMARKS OF THEIR RESPECTIVE OWNERS. It is defined by a legal or regulatory jurisdiction and varies with individual jurisdictions. A dealer paying Blue Book for a trade-in is either going to retail the car (more profit) or push it back through the auto auctions, often at a loss. Below is the top 4 difference between Fair Value vs Market Value, Start Your Free Investment Banking Course, Download Corporate Valuation, Investment Banking, Accounting, CFA Calculator & others. Market Value is a kind of valuation method which is generally not frequently used and is neither accepted globally. According to the Federal Deposit Insurance Corporation (FDIC), market value is defined as "the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus." For federal uses such as estate and gift tax or charitable contributions, fair market value is defined by Treasury Regulation §1.170A-1 (c) (2) as: Market value is unstable and thus varies more than fair value. By closing this banner, scrolling this page, clicking a link or continuing to browse otherwise, you agree to our Privacy Policy, Christmas Offer - Investment Banking Training (117 Courses, 25+ Projects) View More, Investment Banking Training (117 Courses, 25+ Projects), 117 Courses | 25+ Projects | 600+ Hours | Full Lifetime Access | Certificate of Completion, has been a guide to Fair Value vs. Market Value. 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