Fair value or Market value

Market value is used when the business is sold in the ‘open’ market and to an independent third party on an arms length basis. Two separate and non related parties, a willing buyer and willing seller would mean valuing the underlying business or asset at market value.
















But if the sale and purchase is to take place between a specific buyer and a specific seller (common example would be selling to family members or to other directors)  a fair value approach would be required. With this approach, a very detailed and specialist assessment of the business is required and specific aspects such as a director’s contribution to the business and enhancements to the business would need to be included.