What is the difference between fair value and market value for intangible assets?

Fair value is the IFRS 13 / ASC 820 accounting measure: the price that would be received in an orderly transaction between market participants at the measurement date, with the highest and best use assumption mandatory. Market value is the IVS measure: the estimated amount at which an asset should exchange between a willing buyer and willing seller in an open market. They converge when an active market exists and comparable evidence is observable; they diverge when the asset is bespoke and the basis of value requires entity-specific or transaction-specific framing.

Which framework should I use for PPA — IFRS 13 or IVS?

For purchase price allocation under IFRS 3 (UK and global) or ASC 805 (US), fair value as defined by IFRS 13 / ASC 820 is mandatory. The IVS framework can support the methodology (IVS 210 covers intangibles), but the basis of value must be fair value under the accounting standards. Practitioners typically document the engagement as fair-value-under-IFRS-13 with reference to the IVS methodology where helpful.

Are fair value and market value the same number?

Often, yes — for assets with observable markets and no entity-specific elements, the two bases produce numerically close results. They diverge where the open-market assumption requires reconstruction (most Level 3 intangibles), where the engagement output is a range rather than a point, or where one basis incorporates a highest-and-best-use assumption that differs from the asset's current use. The gap is typically narrow but should be reconciled and documented.

What is the fair-value hierarchy under IFRS 13?

IFRS 13 establishes a three-level hierarchy. Level 1 inputs are quoted prices in active markets for identical assets — rare for intangibles. Level 2 inputs are observable inputs other than Level 1 — quoted prices for similar assets, observable rates, observable royalty data. Level 3 inputs are unobservable — discounted cash-flow models with unobservable assumptions, royalty rates from limited comparables, customer-attrition curves. The vast majority of intangible asset measurements sit at Level 3, which carries the highest disclosure burden.

Can I use market value for impairment testing under IAS 36?

Partially. IAS 36 requires the recoverable amount to be the higher of fair value less costs of disposal (FVLCD) and value in use. FVLCD is an IFRS 13 fair-value figure, not an IVS market-value figure. However, the practitioner often draws on IVS-aligned market-value evidence (comparable transactions, market royalty rates) to support the fair-value measurement. The output classification must remain fair value under IFRS 13 for the accounting standard to be satisfied.

How do I document the basis of value in a valuation report?

Under IVS 103, every valuation report must state the basis of value clearly and unambiguously, typically in the executive summary and in a dedicated assumptions section. Where fair value under IFRS 13 / ASC 820 is the basis, the report must reference the accounting standard and confirm the market-participant assumption and the highest-and-best-use assessment. Where market value under IVS is the basis, the report must reference IVS 104 and confirm the willing-buyer / willing-seller framework. Mixed-basis engagements need a clear reconciliation section.

Does HMRC accept market value for transfer-pricing studies?

HMRC's transfer-pricing rules reference the arm's-length principle as the core standard, with practical guidance drawing on both OECD principles and UK-specific case law. Market value evidence under IVS is regularly used as the foundation for arm's-length pricing of intangibles, with explicit reconciliation to fair value where the asset is also recognised on the IFRS balance sheet. Practitioners often produce a combined output that satisfies both the transfer-pricing requirement and the accounting fair-value disclosure.

What is the role of the IVSC in intangible asset valuation?

The International Valuation Standards Council (IVSC) is the global standards body for the valuation profession. Its IVS framework defines bases of value (market value, fair value, investment value, synergistic value), valuation approaches and methods (IVS 105), and asset-specific standards including IVS 210 for intangibles. IVS is widely adopted in M&A advisory, IP-backed lending, transfer pricing, and dispute resolution. It complements rather than replaces the accounting frameworks — practitioners often work to both IVS and IFRS 13 / ASC 820 in parallel.

Accounting Framework

Fair Value vs Market Value (Intangibles)

Fair value vs market value for intangibles — what each means under IFRS 13 and IVS, when they converge, and which to use for PPA, M&A, and tax.

Two consequential bases drive most intangible asset valuation outputs: fair value under IFRS 13 / ASC 820 and market value under the International Valuation Standards (IVS). Fair value is the accounting measure built around market-participant assumptions; market value is the real-economy measure built around willing-buyer / willing-seller assumptions. They converge where the asset has observable markets and diverge where the asset is bespoke or the engagement requires entity-specific framing.

Criteria	Fair Value (IFRS 13 / ASC 820)	Market Value (IVS)
Framework owner	IASB (IFRS 13) and FASB (ASC 820) — converged accounting standards	IVSC (International Valuation Standards Council) — global valuation profession standards
Definition	The price that would be received to sell an asset in an orderly transaction between market participants at the measurement date	The estimated amount for which an asset should exchange on the valuation date between a willing buyer and willing seller in an arm's-length transaction after proper marketing
Transaction type	Exit price — what would be received to sell	Open-market exchange — willing-buyer / willing-seller
Buyer perspective	Market participant — typical buyer characteristics, not the holder	Willing buyer — arm's-length, knowledgeable, without compulsion
Highest and best use	Mandatory — measurement assumes highest and best use, even if the holder uses differently	Implicit — open-market valuations typically incorporate the most economically rational use
Entity-specific synergies	Excluded — only market-participant cash flows included	Excluded — special-purchaser premiums excluded under IVS 104
Hierarchy	Three-level fair-value hierarchy (Level 1, 2, 3) — most intangibles at Level 3	No explicit hierarchy — narrative documentation of evidence quality
Primary use cases	PPA (IFRS 3 / ASC 805), impairment (IAS 36 / ASC 350), recurring fair-value disclosures	M&A advisory, IP-backed lending, transfer pricing, dispute resolution, strategic planning
Output format	Single point estimate at the measurement date	Often a range, with point estimate stated as a best estimate
Disclosure framework	IFRS 13 paragraphs 91-99 (three-level hierarchy, sensitivity, valuation technique)	IVS 103 reporting requirements (scope, basis, methods, limitations)
When the two converge	Active market exists, comparable evidence is observable, no entity-specific synergies in play	Same conditions — observable market, comparable transactions, no special-purchaser elements
When the two diverge	Level 3 intangibles where the market-participant assumption requires reconstruction	Engagements supporting a transaction decision and producing a range rather than a single point
Defensibility focus	Hierarchy classification, unobservable input justification, market-participant assumption documentation	Open-market assumption documentation, willing-buyer / willing-seller framework, evidence sufficiency

When to Use Each Approach

Fair Value (IFRS 13 / ASC 820)

Purchase price allocation under IFRS 3 (UK and global) or ASC 805 (US)
Impairment testing under IAS 36 or ASC 350 (fair value less costs of disposal)
Initial recognition of an intangible exchanged in a non-monetary transaction under IAS 38
Recurring or non-recurring fair-value disclosures under IFRS 13

Market Value (IVS)

M&A advisory — fairness opinions, deal pricing, walk-away analysis
IP-backed lending — loan-to-value collateral assessment
Transfer pricing — arm's-length pricing for intra-group transfers
Dispute resolution — litigation valuations referencing open-market exchange

Our Verdict

Use fair value under IFRS 13 / ASC 820 whenever the output is destined for the accounting framework — PPA, impairment, fair-value disclosures. Use market value under the IVS whenever the output supports a transaction decision, lending collateral, transfer pricing, or strategic planning. They converge for assets with active markets and diverge for bespoke intangibles — always state the basis of value explicitly.

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Fair Value vs Market Value (Intangibles)

When to Use Each Approach

Fair Value (IFRS 13 / ASC 820)

Market Value (IVS)

Our Verdict

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