What is Fair Market Value?
Fair market value (FMV) is the price that a willing buyer would pay to a willing seller for an asset, assuming that both parties are acting in their own self-interest and are fully informed about the asset. For a CFO of a company, FMV is relevant for determining the value of assets for accounting, tax and financial reporting purposes.
For example, a CFO of a company may need to determine the fair market value of a piece of equipment that the company plans to sell. The CFO would consider factors such as the age, condition and usefulness of the equipment, as well as comparable sales of similar equipment in the market, to determine the fair market value of the equipment. This value would then be used for accounting and tax purposes, such as determining the gain or loss on the sale of the asset.
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