We are an ‘Asset’ to your business!
A method of assessing the worth of a company’s assets – like real estate, building property, securities and equity investments, machinery and equipment or other item of worth, both tangible and intangible. Asset valuation is commonly performed prior to the sale of an asset or prior to insuring an asset through property damage insurance policies.
Asset valuation may consist of both subjective and objective measurements. For example, in valuing a company’s goodwill or brand worth, there is no precise measure that can determine the value of brand’s name shown in company's financial statements. This aspect of asset valuation is be subjective and depends on various factors. On the other hand, net profit is an objective measurement based on the actual figure of the income earned and expense incurred by the company.
Methods of Valuation of Assets:
Common methods for determining an asset's value include comparing it to similar assets and evaluating its cash flow potential. Acquisition cost, replacement cost and deprival value are also methods of asset valuation.
- Cost Method / Acquisition cost
- Market Value Method
- Replacement value method
- Net Realizable Method
- Base Stock Method
- Standard Cost Method
- Average Cost Method
Aspects of Asset Valuation
Traditionally, Asset valuation was determined in order to confirm that the value is reported in the yearend financial statements and balanced sheet of the company are accurate and not falsely represented. If assets are not valued properly, it can create a skewed value in accounting documents which can in turn lead to failure on an accounting audit and create problems with tax liability and other issues
In some cases, Valuation of assets like stock, shares and securities is relatively easy. For example, if a company holds stock in another company, it can look at the current trading price of that stock in the market at set intervals for the purpose of an asset valuation. Likewise, assets such as bonds and other securities can be valued because they have been publicly listed on the stock exchanges and have reliable values.
There may be other types of assets which have more unique and dependent valuations. In these cases, asset valuation becomes more complicated. Intangible assets such as copyrights, for example, are difficult to assign value to. Likewise, assets such as real estate require an evaluation of comparable real estate and current market conditions in order to arrive at an accurate and reliable valuation that reflects the fair market value of the asset in question.
Generally at the time of Merger & Acquisition (M & A), take over, dissolution or for the purpose of making an investment in assets, the client needs the pre and post asset valuation. It helps him to determine the carrying value of assets in coming future.
Make the wise decision today. Know the right value from your opportunity advisors.