This question is about senior accountant skills.

What is fair value accounting?

By Zippia Team - Dec. 9, 2022

Fair value accounting is an accounting strategy that utilizes current market values as the foundation for identifying certain assets and liabilities.

Fair value is defined as the approximate price at which an asset is sold or bought when the seller and buyer of the asset agree on a specific price.

To determine fair value, accountants might look at market transactions for related or similar assets, and pick a cost to replace the asset.

Fair value in accounting relies on these concepts:

Current market conditions
Intent of holders
Orderly transaction
Sale to a third party
Active market

There are different methods for delivering fair value in accounting, including:

Market approach
Income approach
Cost approach

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