Fair value is primarily based on which of the following?

Fair value is primarily based on market value, which represents the price that an asset would fetch in the marketplace between willing buyers and sellers. Market value reflects the current economic and market conditions that influence the valuation of an asset. It captures real-time information about demand and supply, making it a critical measure in assessing an asset's worth.

This approach is aligned with financial reporting and valuation standards that aim to depict a realistic snapshot of an asset's value. For instance, in the context of investments, the fair value measurement may rely on the market prices of comparable assets or is derived from available market information.

In contrast, the other options do not align with the essence of fair value. Book value is based on historical cost and depreciates over time, disregarding current market conditions. Future value involves projecting what an asset will be worth in the future, while present value discounts future cash flows to their current worth, both of which do not reflect the immediate market perception of value as effectively as market value does. Thus, market value is the most relevant basis for determining fair value in a practical and economic sense.