This paper defines the fair value concept and its application in the subsequent measurement of assets and liabilities. Fair value is one of the methods of valuing assets and liabilities, which has not yet been unanimously accepted as the basic concept of valuation of assets and liabilities of business entities by accounting professionals, but in recent years is becoming a rising standard in the modern financial reporting system. Fair value is defined in IFRS 13 Fair Value, and for measuring fair value are used three approaches and three measurement levels. In applying the concept of fair value, the assets and liabilities of a business entity are presented at market prices in an active market in the financial statements. Fair value valuation can have a significant impact on the value of assets and liabilities and therefore a significant impact on the financial position and performance of business entities. Applying fair value to evaluate assets and liabilities results in income and expenses that are recognized in the income statement. Research to date on the impact of fair value on the financial position and performance of businesses has concluded that the application of fair value has a bad impact on profitability and activity of company but improves corporate solvency. This paper investigates the impact of the fair value concept on the financial position and performance of selected businesses in the Republic of Croatia. Based on the research, it was concluded that the use of the fair value method has a positive effect on the indebtedness indicators and that it improves the financial position of the company. Meanwhile it was concluded that the use of fair value method has a negative impact on profitability and activity indicators and contributes to lower financial performance of the company.