Fair Market Value

The International Financial Reporting Standard that defines fair value, establishes a framework for measuring it, and requires disclosures about fair value measurements. IFRS 13 introduces a three-level hierarchy based on observable market inputs and is foundational to the valuation of intangible assets in financial reporting.

The US GAAP standard that defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. ASC 820 defines fair value 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.

A valuation methodology that estimates the value of an asset based on observed prices in actual market transactions involving comparable assets. The market approach is used to value intangible assets when reliable transaction data or licensing royalty rates are available, and is one of the three primary approaches alongside the income and cost approaches.

The estimated value of an asset at the end of its useful life or the end of a forecast period. In intangible asset valuation, residual value considerations are important for assets with finite lives, such as patents approaching expiration, as well as for terminal value calculations in discounted cash flow models.

A contractual provision in an acquisition where a portion of the purchase price is contingent on the acquired company achieving specified performance targets post-completion. Earnouts bridge valuation gaps between buyer and seller expectations.

A marketplace where existing shareholders in private companies — typically employees, early investors, or founders — can sell their ownership stakes to new buyers before an IPO or trade sale. Secondary markets for private shares have grown significantly, with platforms such as Forge Global and Nasdaq Private Market facilitating transactions that provide liquidity and price discovery for otherwise illiquid private company equity.

The portion of the total addressable market that a company can realistically serve given its current product, business model, and geographic reach. SAM is a more practical measure of near-term opportunity than TAM.

The total revenue opportunity available for a product or service if it achieved 100% market share. TAM represents the theoretical maximum market size and is used by investors to assess the scale of opportunity and the potential ceiling for a company's growth.

How does impairment testing work for intangible assets and goodwill?

Intangible assets with finite lives are tested for impairment when indicators of value decline exist, while goodwill and indefinite-life intangibles must be tested at least annually by comparing carrying value to recoverable amount.

What is goodwill impairment and when does it occur?

Goodwill impairment occurs when the fair value of a business unit (cash-generating unit) falls below its carrying amount — goodwill is written down, reducing reported earnings.

How do you test goodwill for impairment under current accounting standards?

Goodwill impairment testing compares the carrying amount of a cash-generating unit to its recoverable amount (higher of fair value less costs to sell and value-in-use), with any shortfall recognised as an impairment loss.