Does an exit price definition of fair value imply a liquidation value?
No. Liquidation values imply an immediate sale in which the seller is compelled to enter into a transaction. Fair value, on the other hand, is an orderly transaction in which both the buyer and the seller are willing, but not required, to transact. As with the current definition of fair value in IFRSs, an exit price is not a liquidation value, but the price for an arm’s length transaction completed in the normal course of business between knowledgeable, willing parties (market participants). An exit price reflects the highest and best use of an asset. When the highest and best use of an asset is ‘in use’ (ie the asset is used together with other assets), the fair value of the asset is the price that would be received in a current transaction to sell the asset to a market participant who holds (or could obtain) the other assets (complementary assets). Thus, for example, the exit price for specialised machinery is not the scrap value of the machinery, but the price that would be received
