If it appreciates, DR: Gains and losses from changes in fair value, CR: Investment income, otherwise the opposite entry is made to reflect the investment income

1. What is fair value value?

Fair Value (Fair Value) is also called fair market value and fair price. The price is the price determined by buyers and sellers who are familiar with the market conditions under the conditions of fair transactions and voluntarily, or the transaction price at which an asset can be bought and sold or a liability can be paid off under the conditions of fair transactions between unrelated parties. Under fair value measurement, assets and liabilities are measured at the amount that would be voluntarily exchanged for assets or paid off debts between parties familiar with the market conditions in an arm's length transaction. The purchasing enterprise's recording of the combined business requires the use of fair value information. In practice, an asset appraisal agency usually evaluates the net assets of the merged enterprise.

2. Determination method:

1. Securities are determined based on their current net realizable value (see "Net Realizable Value");

2. Accounts receivable and notes receivable are determined based on the amount expected to be collected in the future, discounted at the actual interest rate at the time, minus estimated bad debt losses and collection costs;

3. Completed products and merchandise inventories , determined based on the estimated selling price minus realization expenses and reasonable profits;

4. Work-in-progress inventory is determined based on the estimated selling price after completion minus the costs and realizations to be incurred until completion. The balance after expenses and reasonable profits is determined;

5. Raw materials are determined according to the current replacement cost;

6. Fixed assets should be handled according to different situations: those that can still be used Fixed assets are valued at the current replacement cost of fixed assets of similar production capacity, unless it is expected that future use of these assets will produce a lower value to the purchasing enterprise; for those assets that are to be sold, or held for a period of time (but not used), Fixed assets sold can be valued at net realizable value; fixed assets that are temporarily used for a period of time and then sold are valued at net realizable value after confirming depreciation during the future use period;

7. Patents Identifiable intangible assets such as rights, trademark rights, lease rights, land use rights, etc. are valued according to the assessed value, and goodwill is determined according to the difference between the investment cost of purchasing the enterprise and the recognized fair value;

8. Other assets, such as natural resources and long-term investments that cannot be traded on the market, are determined based on the appraisal value;

9. Accounts payable, notes payable, long-term loans and other liabilities are obtained by discounting the current interest rate based on the amount to be paid in the future. The amount shall be determined;

10. Contingencies and agreed obligations, such as payments caused by unfavorable lease agreements, contract constraints on the enterprise, and upcoming fixed asset liquidation costs, etc., should be fully considered Estimated and valued at the present value of the expected payment discounted at the then effective interest rate.

As long as certain identifiable assets and liabilities belong to the merged enterprise, their fair value must be determined, such as the enterprise's research and development costs, action plan costs, development costs of a certain formula, etc.

11. Determination of the fair value of financial assets with an active market

For financial assets with an active market, the quoted prices in the active market should be used to determine their fair value. Quotes in active markets refer to prices that are easily obtained regularly from exchanges, brokers, industry associations, pricing service agencies, etc., and represent the prices of market transactions that actually occur in normal transactions.

12. Determination of the fair value of financial assets where there is no active market

If there is no active market for financial assets, the enterprise shall use valuation techniques to determine its fair value. The results obtained using valuation techniques should reflect the possible transaction prices in normal transactions on the valuation date. Valuation techniques include reference to prices used in market transactions between parties who are familiar with the situation and willing to transact, reference to the current fair value of other financial assets that are substantially the same, discounted cash flow methods and option pricing models, etc.

3. Judgment method

If it falls into one of the following three situations, the fair value of the assets exchanged or exchanged out is deemed to be reliably measurable:

1. There is an active market for the assets being exchanged in or the assets being exchanged out, and the fair value is determined based on the market price.

2. There is no active market for the assets being exchanged in or the assets being exchanged out, but there is an active market for the same or similar assets, and the fair value is determined based on the market price of the same or similar assets.

3. There is no comparable trading market for the same or similar assets in or out of the assets, and valuation techniques are used to determine the fair value. When using valuation techniques to determine fair value, it is required that the range of changes in the fair value estimates determined using the valuation techniques is very small, or that the various probabilities used to determine the fair value estimates can be reasonable within the range of changes in the fair value estimates. Sure.