My prior blog post listed some of the different definitions of “fair market value” and “fair value” often used in valuations.
I’m often asked when to use “fair market value” versus “fair value” in a valuation.
Companies that have elected the fair value option will soon be able to record a portion of the change in fair value in other comprehensive income (“OCI”), rather than net income.
So, you or your client just entered into a transaction that requires fair value measurement, such as a business combination or a convertible financing.
There are times when a Company may enter into a convertible financing which could cause them to record a loss on their financials the day they enter into the transaction.