Book value indicates an asset’s value that is recognized on the balance sheet. Essentially, book value is the original cost of an asset minus any depreciation. On the other hand, fair value is referred to as an estimate of the potential value of an asset. In other words, it is the intrinsic value of an asset.

The carrying value, or book value, is an asset value based on the company’s balance sheet, which takes the cost of the asset and subtracts its depreciation over time. The fair value of an asset is usually determined by the market and agreed upon by a willing buyer and seller, and it can fluctuate often.

The book value of a company is the net difference between that company’s total assets and total liabilities, where book value reflects the total value of a company’s assets that shareholders of that company would receive if the company were to be liquidated.

The International Accounting Standards Board defines fair value as the price received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on a certain date, typically for use on financial statements over time.

Market value is higher than book value Its market value is higher than its book value, resulting in a gain for your business. When your company has a higher market value than book value, it typically means your business is profitable and will continue to grow.

Fair value refers to the actual value of an asset – a product, stock. It is determined in order to come up with an amount or value that is fair to the buyer without putting the seller on the losing end. For example, Company A sells its stocks to company B at $30 per share.

Fair Value Method In accounting, fair value (also knows as “fair market value”) is used as a certainty of the market value of an asset (or liability) for which a market price cannot be determined (usually because there is no established market for the asset).

What Is Fair Value. The fair value of a stock is determined by the market where the stock is traded. Fair value also represents the value of a company’s assets and liabilities when a subsidiary company’s financial statements are consolidated with a parent company.

The distinction between fair market value and fair value is in some ways as simple as noting that the only difference between the two terms is that one contains the word “market” and the other does not.