A commonly used definition of the fair market value 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 fair market value of an asset, among others, are that:
II. Distinction from other related concepts
The base of value (such as the fair market value) 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 arbitration
There are three main approaches used to determine a fair market value:12
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