A transaction that assumes there will be adequate market exposure that would allow market participants to gain sufficient knowledge about the asset or liability. In other words, it is based on the assumption that there is exposure to the market for a period before the measurement date to allow for marketing activities (information dissemination and marketing) that are usual and customary for transactions involving such assets or liabilities. In a nutshell, an orderly transaction is not a forced transaction (e.g. a forced liquidation or distressed sale). A fair value measurement supposes that the asset or liability is exchanged in an orderly transaction in the most advantageous market (principal market). Exchange means to sell the asset or transfer the liability at the measurement date.

The concept of an orderly transaction is usually used in distinguishing a fair value measurement from the exit price in a distress sale or forced liquidation. To this end, it assumes that market participants have sufficient knowledge of the asset or liability, including that which would be gained through customary due diligence even if, in reality, this process may not have initiated yet, or never take place at all if the reporting entity doesn’t sell the asset or transfer the liability.