Business Definition for: standard of value
standard of value
one of the properties of
money
, a test of moneyness. A stable national economy depends on an accepted, uniform medium of exchange allowing suppliers and users of funds to set a fair value (price) on money loaned from one party to another, or on goods sold in open, competitive markets. Gold is the ultimate standard, although today most Western currencies no longer are backed by gold, i.e., exchangeable for gold coins or bullion equal to the face value of paper currency. The United States abandoned the gold standard domestically with the Gold Reserve Act of 1934, and internationally in 1971 when it signed the
smithsonian agreement
, which initiated
floating exchange rates
between the major Western countries.
See also
legal tender
,
money
,
barter
,
bullion
Related Terms:
money recognized by law as acceptable payment for debts owed to creditors. In the United States, legal tender (also called lawful money) is all forms of circulating paper money, mostly Federal Reserve Notes, and coins. The term means that money offered as payment has the backing of the government and must be accepted by a creditor, unless a contract calls for another method of payment.
- cash.
- term broadly used to refer to a medium of exchange and unit of value.
exchange of products or services by two companies without cash involvement. The companies contract for a specified amount of the items and the proportions representing full payment. For financial reporting purposes, barter transactions should be reported at the estimated fair market value of the product or service received. This same requirement holds for tax purposes in that each party has to recognize as revenue the fair value of the exchange. For example, a barter takes place when an accountant renders services to a computer store in exchange for a personal computer.
gold or other precious metals in bar or coin form. The major gold trading centers are London and Zurich, with gold futures trading based in New York. Monetary reserves of central banks are kept mostly in gold bullion.
Copyright c 2006, 2000, 1997, 1993, 1990 by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
