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The cost of an asset refers to the amount paid to acquire it, including purchase price and any additional expenses necessary to bring the asset to its intended use. In contrast, fair market value is the estimated price that an asset would sell for in an open and competitive market, reflecting current market conditions and the asset's utility. While cost is a historical figure based on the transaction, fair market value can fluctuate over time due to changes in demand, condition, and economic factors.
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What is Book value vs fair value?
Book value is the value of asset shown in financial statements while fair value is the value at which asset can be sold in market
Is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.?
Yes, the price that would be received to sell an asset or paid to transfer a liability is known as the fair value. This value is determined in an orderly transaction between willing market participants at the measurement date, reflecting current market conditions. Fair value provides a more accurate representation of an asset's worth compared to historical cost, as it accounts for market dynamics and potential changes in demand or supply.
When common stock is issued in exchange for an asset that is not cash the transaction should be recorded at?
When common stock is issued in exchange for an asset that is not cash, the transaction should be recorded at the fair market value of the asset received or the fair value of the stock issued, whichever is more clearly evident. If the fair value of both the stock and the asset can be determined, the transaction is typically recorded using the fair value of the asset. This ensures that the financial statements reflect an accurate representation of the value exchanged in the transaction.
Is the fair value of an asset retirement obligation recorded as an increase to the related asset and as a liability?
Is it true the fair value of an asset retirement obligation recorded as an increase to the related asset and as a liability?
What is the difference between amortization and impairment?
impairment is the decrease of fair value of an intangible asset where amortisation is periodic (usualy yearly) distribution of cost of an asset over its life. suppose a factory equipment worth 25000 and estimated life is 5 years, we will charge 25000/5=5000 /year on a straightline basis as amortisation. Now suppose with this equpment we can build something which required licencing...suppose the machine is used for making coca cola. To obtain the licence, the cost is 100,000. so the licence is an intangible asset. IAS reqires intangible ASSETS to be revalue atleast a year to see whether the fair value has increased/decreased. If the fair value is decreased from the cost/ carrying amount... we say the asset has impaired. And we record the value by which the asset has been impared. Note, Useful life has nothing to do with impairment. Fair value can be market value at the date of the impairment test.
Are the cost and fair market value of an asset the same at the time of acquisition and in all subsequent periods?
Yes
What is Book value vs fair value?
Book value is the value of asset shown in financial statements while fair value is the value at which asset can be sold in market
Difference between book value and fair value in accounting?
Book value of asset is the value of asset shown in books of accounts while fair value of asset is the current price at which that product is selling or sellable in market.
How is the fair market value determined for a specific item or asset?
The fair market value of a specific item or asset is determined by considering factors such as the item's condition, demand, comparable sales, and other market conditions. This value represents the price that a willing buyer and seller would agree upon in a fair and open market transaction.
What is the difference between net asset value and gross asset values?
Gross Versus Net ValueFair market value is the price an asset would bring if it were sold on a voluntary basis, meaning neither buyer nor seller has an obligation to make the exchange. Gross fair market value is the fair market value of an asset before allowing for any liabilities such as loans, taxes or liens. Suppose a warehouse has a gross fair market value of $250,000. If the property is collateral for a $100,000 business loan, the net fair market value of the asset becomes $150,000.
What does NAV stand for in reference to finance?
NAV stands for Net Asset Value. The net asset value for any item is fair market value minus any outstanding loan costs. For example, a home with the fair market value of $100,000 and a loan balance of $75,000 has a NAV of $25,000.
Is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.?
Yes, the price that would be received to sell an asset or paid to transfer a liability is known as the fair value. This value is determined in an orderly transaction between willing market participants at the measurement date, reflecting current market conditions. Fair value provides a more accurate representation of an asset's worth compared to historical cost, as it accounts for market dynamics and potential changes in demand or supply.
When common stock is issued in exchange for an asset that is not cash the transaction should be recorded at?
When common stock is issued in exchange for an asset that is not cash, the transaction should be recorded at the fair market value of the asset received or the fair value of the stock issued, whichever is more clearly evident. If the fair value of both the stock and the asset can be determined, the transaction is typically recorded using the fair value of the asset. This ensures that the financial statements reflect an accurate representation of the value exchanged in the transaction.
How is fair value determined in acquisition?
Fair value in an acquisition is determined by assessing the market value of the acquired assets and liabilities, often using various valuation techniques. These can include the income approach, which estimates future cash flows discounted to present value, the market approach, which compares similar transactions, and the cost approach, which evaluates the replacement cost of assets. Additionally, factors such as synergies, market conditions, and the specific circumstances of the acquisition can influence the fair value assessment. Ultimately, fair value reflects the price that would be received to sell an asset in an orderly transaction between market participants.
If you start a new business usin existing machinery equipment you own can the fair market value of the equipment be used as asset value for depreciation?
Yes whenver old asset is utilized in business it is it's fair value which is used for depreciation purpose in business.
Temporary investments are recorded at cost but and reported at?
fair market value
Is the fair value of an asset retirement obligation recorded as an increase to the related asset and as a liability?
Is it true the fair value of an asset retirement obligation recorded as an increase to the related asset and as a liability?
