Skip to content
  • Home
  • Services
    • Audit & Attest
      • Financial Statement Audits
      • Employee Benefit Plans
      • Attestation Engagements
      • Compilations & Review
      • SOC
      • Agreed-Upon Procedures
    • Advisory
      • Transaction Advisory Services
      • Cybersecurity, Technology Risk, Privacy
      • High Net Worth Services
      • Forensic Services
      • Litigation Services
      • Management Consulting
      • Technology Services
      • Valuation Services
    • Business & Tax
      • Corporate Income Tax
      • Individual Income Tax
      • International Tax
      • State and Local Tax Compliance and Tax Minimization Services
      • Tax Planning
    • T&C Family Office Group
  • Industries
    • Construction & Real Estate
    • Healthcare
    • Manufacturing & Distribution
    • Nonprofit Organizations
    • Private Equity Firms
    • Privately-held Companies
    • Technology & Energy
  • Firm
    • Overview
    • Our People
    • Our Community
    • Templeton Group
      • PracticePro 365
      • T&C Family Office Group
      • Templeton Investigative Services
  • Careers
    • Experienced
    • Students
    • Benefits
  • News
  • Pay My Bill
  • Home
  • Services
    • Audit & Attest
      • Financial Statement Audits
      • Employee Benefit Plans
      • Attestation Engagements
      • Compilations & Review
      • SOC
      • Agreed-Upon Procedures
    • Advisory
      • Transaction Advisory Services
      • Cybersecurity, Technology Risk, Privacy
      • High Net Worth Services
      • Forensic Services
      • Litigation Services
      • Management Consulting
      • Technology Services
      • Valuation Services
    • Business & Tax
      • Corporate Income Tax
      • Individual Income Tax
      • International Tax
      • State and Local Tax Compliance and Tax Minimization Services
      • Tax Planning
    • T&C Family Office Group
  • Industries
    • Construction & Real Estate
    • Healthcare
    • Manufacturing & Distribution
    • Nonprofit Organizations
    • Private Equity Firms
    • Privately-held Companies
    • Technology & Energy
  • Firm
    • Overview
    • Our People
    • Our Community
    • Templeton Group
      • PracticePro 365
      • T&C Family Office Group
      • Templeton Investigative Services
  • Careers
    • Experienced
    • Students
    • Benefits
  • News
  • Pay My Bill
CONTACT US

Value Depends

  • Blog, Valuation Services

It is critical to any business valuation engagement to define the standard of value at the beginning of the project. The standard of value ultimately dictates the true value of a business for a given purpose. It is true that value is what a buyer and seller agrees to, however for various purposes from tax reporting to mergers and acquisitions the value changes significantly as the process to arrive at value differs.

For many situations, the standard of value is legally mandated, whether by law or by binding legal documents or contracts. In other cases, it is a function of the wishes of the parties involved. The standard of value usually reflects an assumption as to who will be the buyer and who will be the seller in the hypothetical or actual sales transaction regarding the subject assets, properties, or business interests. It defines or specifies the parties to the actual or hypothetical transaction. In other words, the standard of value addresses the questions: “value to whom?” and “under what circumstances?” The standard of value, either directly by statue or (more often) as interpreted in case law, often addresses what valuation methods are appropriate and what factors should or should not be considered.

There are five standards of value:

1. Fair Market Value
2. Investment Value
3. Intrinsic Value
4. Fair Value (State law)
5. Fair Value (Financial reporting)

The focus of our discussion today is Fair Market Value vs. Investment Value, how they differ and its application.

Fair Market Value

The term fair market value is defined as follows:

The price at which the property would change hands between a willing buyer and a willing seller,   neither being under a compulsion to buy or sell and both having reasonable knowledge of relevant facts.

Investment Value

The term investment value is defined as follows:

The specific value of property to a particular investor (or class of investors) for individual investment reasons. Investment value considers a specific investor with specific motives and investment criteria rather than the hypothetical investor of fair market value who evaluates all data to make a rational decision.

Fair market value is the standard of value utilized for tax reporting such as valuations for estate and gift tax purposes. Investment value is the true economic value to a specific investor, which could incorporate synergies to be potentially achieved by investment in a company. Investment value is largely utilized for management planning purposes for valuations in mergers and acquisitions.

In subsequent articles we will cover the remaining three standards of value and the three commonly used valuation approaches.

Categories
  • Agribusiness
  • Assurance, Advisory & Review
  • Audit & Attest
  • Blog
  • Business and Tax
  • Business Consulting & Corporate Compliance
  • Corporate Income Tax
  • Current Opportunities
  • Cybersecurity, Technology Risk, Privacy
  • Employee Benefit Plan
  • Employee Benefit Plans / 401(k)
  • Healthcare
  • High Net Worth Individuals
  • High Net Worth Services
  • Individual Income Tax
  • Industries
  • Manufacturing & Distribution
  • Newsletter Articles
  • Newsletters
  • Nonprofit
  • Press Releases
  • Privately Held Companies
  • Professional Services
  • Real Estate & Construction
  • Retail
  • Services
  • Specialty Tax Services
  • State and Local Tax Complianc
  • T&C Family Office Group
  • Tax Planning
  • Tax Planning & Compliance
  • Technology
  • Uncategorized
  • Valuation Services
  • Valuation Services

SHARE THIS ON:

RELATED POSTS

The One, Big, Beautiful Bill Act provides certainty for estate planning

Ever since the Tax Cuts and Jobs Act (TCJA) was signed into law in 2017, estate planners have had to take into account a looming

Read More »

How to keep cost cutting from increasing fraud risk

In the process of slashing expenses? Just be careful not to cut essential items, such as sufficient staffing to maintain strong internal controls, from your

Read More »

Understanding spousal IRAs: A smart retirement strategy for couples

Retirement planning is essential for all families, but it can be especially critical for couples where one spouse earns little to no income. In such

Read More »

Contact Us

WEST PALM BEACH
Esperante Building
222 Lakeview Avenue
Suite 1200
West Palm Beach, FL 33401
(561) 798-9988
Fax: (561) 798-4053

FORT LAUDERDALE
The Main
201 East Las Olas Boulevard
Suite 1650
Fort Lauderdale, FL 33301
(954) 333-0001
Fax: (954) 765-0719

Twitter Facebook Instagram Youtube Linkedin
© 2025 Templeton & Company. All Rights Reserved. Website by Weber & Co.
Services
  • Audit & Attest
  • Advisory
  • Business & Tax
  • T&C Family Office Group
  • Pay My Bill
  • Audit & Attest
  • Advisory
  • Business & Tax
  • T&C Family Office Group
  • Pay My Bill
Industries
  • Construction & Real Estate
  • Healthcare
  • Manufacturing & Distribution
  • Nonprofit Organizations
  • Private Equity Firms
  • Privately-held Companies
  • Technology & Energy
  • Construction & Real Estate
  • Healthcare
  • Manufacturing & Distribution
  • Nonprofit Organizations
  • Private Equity Firms
  • Privately-held Companies
  • Technology & Energy
Firm
  • Overview
  • Our People
  • Our Community
  • Templeton Group
  • Terms & Conditions
  • Overview
  • Our People
  • Our Community
  • Templeton Group
  • Terms & Conditions
Careers
  • Experienced
  • Students
  • Benefits
  • Experienced
  • Students
  • Benefits