market price

Examples of market price in the following topics:

• Calculating Fair Value

  • The market price of the stock is USD 1.
  • In accounting, fair value is used as an approximation of the market value of an asset (or liability) for which a market price cannot be determined (usually because there is no established market for the asset).
  • Both the price and costs to do the transaction must be considered in determining which market is the most advantageous market.
  • The market price of the stock is USD 1.
  • Fair value is defined as a rational and unbiased estimate of the potential market price of a good, service, or asset.

• Current Issues in Reporting and Disclosure

  • Mark-to-market or fair value accounting refers to accounting for the fair value of an asset or liability based on the current market price, for similar assets and liabilities, or based on another objectively assessed "fair" value.
  • Mark-to-market accounting can become inaccurate if market prices change unpredictably.
  • The section also provides that commodities dealers can elect mark to market treatment for any commodity (or their derivatives) which is actively traded (i.e., for which there is an established financial market providing a reasonable basis to determine fair market value by disseminating price quotes from brokers/dealers or actual prices from recent transactions).
  • Opponents of considering options as an expense say that the real loss–due to the difference between the exercise price and the market price of the shares–is already stated on the cash flow statement.
  • Since companies generally issue stock options with exercise prices which are equal to the market price, the expense under this method is generally zero.

• Accounting Methodologies: Amortized Cost, Fair Value, and Equity

  • Fair value, also called fair price, is a concept used in accounting and economics, defined as a rational and unbiased estimate of the potential market price of goods, services, or assets, taking into account such objective factors as:
  • The ownership of less than 20% creates an investment position carried at historic book or fair market value (if available for sale or held for trading) in the investor's balance sheet.
  • Fair value, defined as a rational and unbiased estimate of the potential market price of a good, service, or asset.

• Characteristics of Bonds

  • Ownership of bonds are often negotiable and transferable to secondary markets.
  • It usually refers either to the current yield, or running yield, which is simply the annual interest payment divided by the current market price of the bond.
  • It can also refer to the yield to maturity or redemption yield, which is a more useful measure of the return of the bond, taking into account the current market price, and the amount and timing of all remaining coupon payments and of the repayment due on maturity.
  • The market price of a tradeable bond will be influenced among other things by the amounts, currency, the timing of the interest payments and capital repayment due, the quality of the bond, and the available redemption yield of other comparable bonds which can be traded in the markets.
  • The net proceeds that the issuer receives are thus the issue price less issuance fees.

• Basic Components of Asset Valuation

  • These models rely on mathematics rather than price observation.
  • Relative value models determine value based on the observation of market prices of similar assets.
  • The most common option pricing models are the Black–Scholes-Merton models and lattice models.
  • For instance, when an analyst believes a stock's intrinsic value is greater (less) than its market price, an analyst makes a "buy" ("sell") recommendation.
  • An appraised value is an expert's opinion of an item's fair market price if the item were sold.

• Issuing Bonds

  • The market price of a bond is expressed as a percentage of nominal value.
  • Bonds can sell for less than their face value, for example a bond price of 75 means that the bond is selling for 75% of its par (face value).
  • The amount of risk associated with the company issuing the bond determines the price of the bond.
  • If a bond has a coupon interest rate that is higher than the market interest rate it is considered a premium.
  • Explain how a company would record a bond issue and how to determine the selling price of a bond

• Fair Value Method

  • The ownership of less than 20% creates an investment position carried at fair market value in the investor's balance sheet.
  • In accounting, fair value (also knows as "fair market value") is used as a certainty of the market value of an asset (or liability) for which a market price cannot be determined (usually because there is no established market for the asset).
  • Since market transactions are often not observable for assets such as privately held businesses and most personal and real property, fair value must be estimated.
  • In United States tax law, the definition of fair value is found in the United States Supreme Court decision in the Cartwright case: the fair market value is the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts.
  • Fair market value (FMV) is an estimate of the market value of a property.

• Lower of Cost or Market

  • In lower of cost or market (LCM), inventory items are written down to market value when the market value is less than the cost of the items.
  • The criterion for reporting this is the current market value.
  • The basic assumption of the LCM method is that if the purchase price of an item has fallen, its selling price also has fallen or will fall.
  • Under LCM, inventory items are written down to market value when the market value is less than the cost of the items.
  • Inventories are valued at cost, which is not in excess of current market price.

• Bond Valuation Method

  • A bond's value is measured by its sale price, but a business can estimate a bond's price before issuance by calculating its present value.
  • The market rate is what other bonds that have a similar risk pay in interest.
  • If the market rate is less than the coupon rate, the bonds will probably be sold for an amount greater than the bonds' value.
  • If the market and coupon rates differ, the issuing company must calculate the present value of the bond to determine what price to charge when it sells the security on the open market.
  • The discount rate for both the principal and interest payment components is the market rate when the bond was issued.

• Cost of Land

  • Land is recognized at its historical cost or purchase price, and can include any other related initial costs spent to put the land into use.
  • If the land's market value increases over time, its value on the balance sheet remains at historical cost.
  • For example, land purchased in 1988 for $90,000, would still appear on the December 31, 2010 balance sheet at $90,000, even though its market value is now $300,000.
  • If at a future date the land is sold due to a business relocation or other reason, the difference between the land's market value and its historical cost will result in a gain or loss disclosed on the income statement.