Understanding the Sound Value of Securities in Legal Terms
Definition & Meaning
The sound value of securities refers to an estimated value of financial securities that do not have enough market activity to establish a clear market price. This value is typically based on the par value of long-term securities held as investments, rather than for immediate sale. It applies when there has been no default on interest payments or principal repayments, and there are no appraisals or offers that suggest the securities are worth less than their par value.
Legal Use & context
The term "sound value of securities" is often used in financial and investment contexts, particularly in relation to securities law and accounting practices. It is relevant in areas such as:
- Investment management
- Financial reporting
- Taxation of investments
Users may encounter this term when dealing with investment portfolios, estate planning, or financial disclosures. For those managing their own investments, utilizing legal templates from US Legal Forms can help in documenting securities and their valuations effectively.
Real-world examples
Here are a couple of examples of abatement:
Example 1: A company holds bonds with a par value of $1,000 each that are not actively traded on the market. If the company has consistently paid interest and there are no indications of default, the sound value of these bonds remains at their par value of $1,000.
Example 2: An investor owns shares in a private company that has not been appraised recently. Since there are no offers to buy or sell the shares and no defaults in payment, the sound value of these shares would be considered their par value, even though they lack a market price. (hypothetical example)