Fair value in the professional valuation : concept and models

Artemenkov, Andrey, Lodh, Suman and Nandy, Monomita (2018) Fair value in the professional valuation : concept and models. International Journal of Critical Accounting, 10(6), pp. 427-446. ISSN (print) 1757-9848


The paper is on the subject of value measurement bases in Professional Valuation and, as such, also has a direct relevance for the field of Accounting Measurements. In this paper we, specifically, consider semantic and methodological features of Equitable/Fair value as a sui generis basis of valuation in the Professional valuation. As used in the field of Professional Valuation, Equitable/Fair value is the logically necessary basis for estimating values-in-exchange for illiquid assets traded on the markets where the operations of the 'law of one price' are very weak. Its logical relevance is demonstrated with the aid of a tool based on Venn-diagrammatic approach (VDA). This VDA is also helpful in explaining in detail interrelationships between other valuation bases used in Professional Valuation. In particular, the article analyzes fair value estimating formulas based on the V. Galasyuk's approach and the Transactional Asset Pricing Approach. At the same time, the unavoidable economic and ethical nature of Fair value as used in Professional Valuation is emphasized, which becomes even more pronounced with the renaming of this valuation basis from Fair to Equitable Value in the International Valuation Standards (IVS) 2017 edition. The contribution of the Paper is in analyzing the main aspects of Fair value estimation theories that exist today in terms of where they fall in the normativist/positivist continuum of economic analysis and drawing into relief their distinguishing elements, while the proposed VDA tool can also find an application as a helpful tool for valuation and accounting measurements analyses. It is also hoped that the debates on Equitable/Fair value as they evolved in the field of Professional Valuation and the ensuing respective proposals in this Paper will help provide a new perspective enriching wider debates on Fair Value in the Accounting Measurements world.

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