-206-
3. Asset-Based Approach
The asset-based approach generally values property by
determining the cost to reproduce it.
D. Fair Market Value Compared With Fair Value
1. Meaning of the Term “Fair Value”
We understand the term “fair value” to have two separate and
distinct meanings, the first under GAAP and the second under
State law.
a. GAAP Purposes
As to the first meaning, the term “fair value” is often the
standard followed by accountants in their preparation of
financial statements. Financial statements are used not only by
the clients for whom they are prepared but also by lending banks,
buyers of businesses, the SEC, and countless others. For
purposes of financial accounting, SFAS No. 107 defined the fair
value of a financial instrument as:
the amount at which the instrument could be exchanged
in a current transaction between willing parties, other
than in a forced or liquidation sale. If a quoted
market price is available for an instrument, the fair
value to be disclosed for that instrument is the
product of the number of trading units of the
instrument times that market price.
b. State Law Purposes
As to its second meaning, most State statutes usually define
the term for purposes of valuing dissenting stockholders’
appraisal rights and, sometimes, for purposes of valuing property
Page: Previous 196 197 198 199 200 201 202 203 204 205 206 207 208 209 210 211 212 213 214 215 NextLast modified: May 25, 2011