Fair Value

The concepts of “market value” and “fair value” (commonly used in financial reporting standards) are generally compatible; however, they are not identical in all cases.

Fair value is an accounting concept defined in International Financial Reporting Standards (IFRS) and similar frameworks as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between knowledgeable and willing parties.

Fair value under IFRS is applied for the following purposes:

• revaluation of property, plant and equipment;
• preparation of financial statements;
• initial recognition of assets.

Fair value less costs to sell is the amount obtainable from the sale of an income-generating asset or cash-generating unit in an orderly transaction between knowledgeable and willing parties, less the costs of disposal.

Special Value

Special value is an amount that exceeds market value and reflects particular attributes of an asset that are of value only to a specific purchaser.

A special purchaser is a buyer for whom a particular asset has special value due to advantages arising from ownership, which are not available to market participants generally.

Special value may arise from the physical, functional, or economic association of an asset with other assets.

Special value is used for:

• management decision-making;
• transactions involving a special purchaser.

Investment Value

Investment value is the value of an asset to a particular investor or group of investors for identified investment objectives.

Unlike market value, investment value does not require consideration of the asset’s sale in an open market.

Investment value is used for:

• management decision-making;
• investment project evaluation;
• acquisition decisions.

Synergistic Value

Synergy represents an additional element of value arising from the combination of two or more ownership interests, where the combined value exceeds the sum of the individual interests.

Synergistic value is used for:

• acquisitions and disposals;
• mergers and consolidations;
• restructuring;
• management decision-making.

Cadastral Value

Cadastral value is determined using mass appraisal methods for market value in accordance with applicable cadastral valuation legislation.

It is primarily used for taxation purposes.

Book Value

Book value is used in two contexts:

• For assets: the capitalized cost of creation or acquisition, less accumulated depreciation, amortization, and depletion, as reflected in accounting records.
• For a business: the difference between total assets (net of depreciation, amortization, and depletion) and total liabilities, as presented in the balance sheet.

In this context, book value is synonymous with net asset value, net worth, or equity.

Book value is used in accounting.

Adjusted Book Value

Adjusted book value is the book value modified by increasing, decreasing, or otherwise adjusting the carrying amounts of one or more assets or liabilities.

Used in accounting.

Value in Use

1. The present value (discounted) of future cash flows expected from the continued use of an asset and its disposal at the end of its useful life.
2. The present value (discounted) of future cash flows expected from an asset or a cash-generating unit (CGU).

It should be noted that, in financial reporting, this concept includes the value of the asset at the end of its useful life, which differs from its use in general valuation practice.

Value in use of a non-cash-generating asset
The present value of the remaining service potential of the asset.

Value in Exchange

1. The value recognized in the marketplace at which ownership is transferred (actually or hypothetically). Market value, as defined in International Valuation Standards for financial reporting purposes, is based on value in exchange rather than value in use.
2. The monetary value of property exchanged for another asset or assets, where money serves as the measure of relative value.

Salvage Value

Salvage value is the value of an asset determined under specific conditions of disposal.

It represents the value of an asset that has reached the end of its economic life for its original purpose but may still have value for alternative use or for recovery of its components.

Intrinsic Value

Intrinsic value is the amount derived from fundamental analysis and represents the “true” or “real” value of an asset.

It is a long-term, non-market-based concept that smooths short-term price fluctuations.

Used for:

• acquisition and disposal decisions;
• management decision-making.

Residual Value

Residual value is the estimated amount that an entity would currently obtain from disposal of an asset, after deducting estimated costs of disposal, assuming the asset is already at the age and condition expected at the end of its useful life.

It represents the net amount expected to be received at the end of the asset’s useful life.

In this context, residual value is equivalent to salvage value.