The chapter discusses the concept of fair value in financial reporting, focusing on its history, application in valuations for financial reporting, and how it differs from fair market value. It explains how fair value is used in business combinations and asset impairment tests, with a focus on audit issues related to fair value measurement. Fair market value is based on a value-in-exchange premise, while fair value is often based on a premise of value in-use. The current guidance under ASC 820 uses a valuation premise based on the highest and best use of the asset from the perspective of a market participant, which may differ from the reporting entity's intended use.