The key elements of the definition of fair value are as follows:
– current exit price: to sell an asset or paid to transfer a liability
– in an orderly transaction
– between market participants
– at the measurement date
How does the proposed definition of fair value differ from that used in current accounting standards?
The definitions are the same in terms of:
– assumes an hypothetical transaction
– the transaction is orderly
– market participants is the same as knowledgeable willing parties in an arm’s length transaction
The new definition:
– specifies that an entity is selling the asset, not buying
– clarifies that a liability is to be transferred
– specifies the need for a measurement date
