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Determining Fair Value of a Transaction or Financial Statement Item

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Determining fair value of a transaction or financial statement item for inclusion in the financial statements is a type of accounting estimate.


Definitions:

Market Price

The rate at which a service or asset can presently be acquired or disposed of in the market.

Book Value

The net value of a company's assets minus its liabilities, often used as an estimate of a company's value if it were to be liquidated.

Market Price

The ongoing trading price for assets or services available in a market setting.

Retention Ratio

The percentage of a company's net income that is retained rather than being paid out as dividends, indicating reinvestment back into the business.

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