Fair Value is an accounting concept that refers to the measurement of the economic worth or market price of a company's assets, liabilities and equity. It represents the estimated amount that would be paid by a willing buyer to a willing seller in an arm’s length transaction for an asset or security.
In other words, fair value is the price at which an investment property could be bought or sold between two knowledgeable parties who are under no compulsion to act. It helps investors and analysts make informed decisions about buying, selling or holding a particular stock by providing them with relevant information about its current market worth.
Fair value is calculated using various methods depending on the type of asset being valued such as historical cost, net present value, replacement cost, etc. It’s an important concept in financial reporting and helps to provide a more accurate picture of a company's financial position and performance.