The fair value of an asset, as defined in the accounting standards, is:
A) the costs incurred to purchase an asset and make it ready for use.
B) the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date, after deducting all the costs of that transfer.
C) the price paid for an asset less any directly attributable costs.
D) the costs that would be incurred if the asset needed to be replaced.

Question

Quizplus · Accepted Answer

The fair value of an asset is defined as the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date, after deducting all the costs of that transfer. This definition is in line with the definition provided in the accounting standards. Option A refers to the cost of purchase and preparation for use, which is not the same as fair value. Option C refers to the purchase price less any directly attributable costs, which is not the same as the fair value. Option D refers to the cost of replacement, which is not necessarily the same as the fair value of the asset.

The Fair Value of an Asset, as Defined in the Accounting