When is the fair value of a business acquired determined?

The fair value of a business acquired is determined on the acquisition date. This is the point when the buyer obtains control of the acquired business and is when the transaction is finalized. Fair value assessment involves measuring the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at that specific time.

Assessing fair value on the acquisition date captures the market conditions and specific circumstances surrounding the transaction, such as the economic environment, competitive landscape, and the unique attributes of the business being acquired. This timing is critical because various factors that influence value can change significantly over time, such as market dynamics or the performance of the business, if assessed at a later date.

Other options, such as determining fair value on the date of valuation or at the beginning of the financial year, do not reflect the specific moment of acquisition where the relevant economic factors are in play. Similarly, waiting until the completion of a business plan would be excessively delayed and would not accurately reflect the immediate value of the business as it was acquired. Therefore, the acquisition date is the most relevant and definitive point for establishing fair value in business valuations.