{"ok":true,"canonical_url":"https://dealroom.so/glossary/lower-of-cost-or-fair-market-value","api_url":"https://dealroom.so/api/public/glossary/lower-of-cost-or-fair-market-value","data_freshness":{"sba_records_through":"2026-05-31","fdic_records_through":"2026-03-31","dealroom_last_updated":"2026-06-16","timezone":"America/Chicago"},"source_summary":["Public SBA 7(a) loan records","FDIC institution data","DealRoom lender and franchise enrichment"],"term":{"slug":"lower-of-cost-or-fair-market-value","term":"Lower of cost or fair market value","group":"Reading the business","definition":"This is an accounting principle for valuing inventory or assets. You record the asset at whichever amount is less: its original cost or its current market value.","what_it_means":"This principle is important when evaluating the inventory or equipment included in an asset purchase. If market values have declined, the recorded value on the balance sheet might be overstated compared to its true worth. During due diligence, confirm inventory valuation aligns with this conservative approach.","url":"https://dealroom.so/glossary/lower-of-cost-or-fair-market-value","official_sources":[],"related":[{"slug":"fair-market-value","term":"Fair market value","url":"https://dealroom.so/glossary/fair-market-value"},{"slug":"inventory","term":"Inventory","url":"https://dealroom.so/glossary/inventory"},{"slug":"business-valuation","term":"Business valuation","url":"https://dealroom.so/glossary/business-valuation"},{"slug":"asset-based-approach","term":"Asset-based approach","url":"https://dealroom.so/glossary/asset-based-approach"}],"related_questions":[{"question":"How does a lender determine the fair market value of business equipment used as collateral?","url":"https://dealroom.so/sba-7a/questions/how-does-a-lender-determine-the-fair-market-value-of-business-equipment-used-as-collateral"},{"question":"How does the SBA verify the fair market value of assets contributed as equity injection?","url":"https://dealroom.so/sba-7a/questions/how-does-the-sba-verify-the-fair-market-value-of-assets-contributed-as-equity-injection"},{"question":"How does the SBA evaluate the fair market value of goodwill in a business acquisition for financing?","url":"https://dealroom.so/sba-7a/questions/how-does-the-sba-evaluate-the-fair-market-value-of-goodwill-in-a-business-acquisition-for-"},{"question":"Can the fair market value of raw materials I contribute to the acquired business count towards equity?","url":"https://dealroom.so/sba-7a/questions/can-the-fair-market-value-of-raw-materials-i-contribute-to-the-acquired-business-count-tow"},{"question":"Can the fair market value of equipment I already own be used as equity for an acquisition?","url":"https://dealroom.so/sba-7a/questions/can-the-fair-market-value-of-equipment-i-already-own-be-used-as-equity-for-an-acquisition"},{"question":"Can the fair market value of equipment I already own and contribute to the acquired business count towards my equity?","url":"https://dealroom.so/sba-7a/questions/can-the-fair-market-value-of-equipment-i-already-own-and-contribute-to-the-acquired-busine"}]},"caveats":["Definitions represent DealRoom's plain-English interpretation for buyers; verify regulatory terms against the official SBA and eCFR sources listed.","Not legal, tax, or financial advice, and not an SBA eligibility determination."],"citation":{"label":"DealRoom.so Glossary — Lower of cost or fair market value","url":"https://dealroom.so/glossary/lower-of-cost-or-fair-market-value","source_type":"DealRoom Data"}}