The formula for calculating the Net Fair Value of Assets is derived from the fundamental accounting principle that the net value of an entity's assets is determined by subtracting liabilities from the total value of the assets. When we assess the fair value of an entity's assets, we also need to consider what obligations remain. This is where the fair value of liabilities comes into play.
So, the Net Fair Value of Assets is calculated by taking the Fair Value of Assets and subtracting the Fair Value of Liabilities. This calculation gives a clearer picture of the actual worth of what an entity possesses after accounting for what it owes.
The other options do not reflect this relationship accurately. For example, adding the fair value of liabilities to assets does not yield a meaningful measure of net value, nor do division or multiplication provide a valid financial or accounting interpretation in this context. Thus, the correct approach is to subtract liabilities from assets to find the net fair value.