According to valuation principles, what is a condition that may affect the fair market value of assets?

Obsolescence is indeed a significant condition that can affect the fair market value of assets. It refers to a reduction in the desirability or usefulness of an asset due to various factors. These can include technological advances, changes in consumer preferences, or even physical wear and tear that diminish the value of a product or property over time. When an asset becomes obsolete, its market value is likely to decrease as potential buyers question its utility or seek newer, more efficient alternatives.

In contrast, appreciation refers to an increase in the value of an asset over time, often due to market demand or improvements made to the asset. While appreciation can influence the fair market value, it generally leads to an increase rather than a condition negatively affecting the value.

Overvaluation occurs when an asset is priced higher than what the market can actually support based on fundamental value, usually due to speculation or market trends, rather than intrinsic value changes. Though overvaluation can affect fair market value, it is more about mispricing rather than a tangible condition affecting the asset itself.

Speculative bubbles represent a situation where asset prices are driven above their fundamental value due to excessive enthusiasm or speculation. While related to market dynamics, it does not directly reflect inherent conditions of the asset affecting its fair market value