A commonly used definition of the FMV is provided in the International Glossary of Business Valuation Terms:2 “the price, expressed in terms of cash equivalents, at which property would change hands between a hypothetical willing and able buyer and a hypothetical willing and able seller, acting at arms length in an open and unrestricted market, when neither is under compulsion to buy or sell and when both have reasonable knowledge of the relevant facts.”3
Therefore, key features of the FMV of an asset, among others, are that:
II. Distinction from other related concepts
The base of value (such as the FMV) must reflect the purpose of the valuation exercise.8 The IVS provides several alternative bases of value, including:
III. Calculation of fair market value in international arbitrations
There are three main approaches used to determine a FMV:12
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