Fair value (juste valeur)

Fair value is an accounting concept before it is a valuation concept. IFRS 13 defines it as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. It applies to listed companies and to those that have opted for IFRS, notably for their investment property (IAS 40).

The European Valuation Standards 2025 distinguish two uses. For financial reporting, fair value follows IFRS 13 and generally corresponds to the market value of the property. Outside accounting, the EVS recognise a fair value between identified parties: the price that would be agreed between named participants, each fully informed and acting according to their own objectives. This second meaning can differ from market value, because it takes into account the particular situation of the parties.

Where the rule comes from

The Charte de l’expertise en évaluation immobilière (the French property valuation charter) presents fair value in Title III, § 1.3: principles of determination (unit of account, principal market, highest and best use), methods (market, income, cost) and the data hierarchy. Property valuations most often fall within level 3, that of unobservable inputs (discount rates, internal assumptions). The EVS 2025 deal with fair value in EVS 2, § 4, and guidance note EVGN 5 details its application to accounts.

In a valuation report

When the instruction concerns IFRS accounts or shares in a company holding property, I state expressly that the basis of value is fair value, name the standard applied and the level of the data hierarchy. I document the unobservable inputs (rates, future rents, vacancy) and explain how the fair value adopted matches or departs from market value. For a fair value between identified parties, I describe the parties, their objectives and the particular advantages taken into account, and I point out that market value may be different.

Example

A property company holds commercial premises let at €36,000 a year. For its accounts, fair value is established by capitalising the market rent at 6 %, after adjusting for foreseeable vacancy, giving €570,000, classified at level 3. Separately, two shareholders are negotiating a transfer of shares between themselves: one of them runs a business from the premises and values the security of occupation. A fair value between identified parties could take that advantage into account, which market value ignores.

Not to be confused with

Market value addresses the market as a whole; investment value is the value for one specific investor according to their own criteria; accounting fair value comes close to market value but follows a standard and a data hierarchy of its own.