Importance Of Company Asset Valuation

By Marissa Velazquez

It is important that company asset valuation is done before major transactions are undertaken in any business. The sale and purchase of items that are owned and controlled by the company are very important undertakings that require that you have vast information to come to decisions. The reason why you should carry out this procedure is so that you can know how much the asset in the transaction is worth so that you cannot overprice or under price it.

There are two types of valuers; internal and external. Internal valuers may be more conversant with the appropriate information in the business thus more efficient. However, they can be very biased and cause you to make biased decisions. External brokers are more professional and neutral thus the information they provide is guaranteed to be more reliable.

For the valuer to come up with a good report, they have to be able to access all the important information that they need. This includes the purpose of the valuation, the historical background of the business cutting across all departments, and the financial and marketing records. They need all these to prepare a report that you can rely on to make any decision concerning the transaction.

One of the methods that you can use is called the net worth method. This one works on the values provided for all the assets and the liabilities. The difference between the two provides you with the net worth of the business. The major disadvantage of this method, however, is that you cannot accurately determine the value of intangible assets.

Information on the profits of the business and the returns on investment are very useful in calculating the net profits. As much as it is the most common method, some people have criticized it saying that the annual increase or decrease in profits or income are not taken into account. Therefore, considering that all the methods have their merits and demerits, it is wise that you use a combination of methods.

The asset to be valued has to be categorized as current, non-current or intangible. Both current and non-current assets are considered tangible. Current assets are short term and are expected to be converted back to cash in a period of 12 months or less. For you to value these, you have to look at the balance sheet of the business and establish the stock at hand.

Those that are considered as non-current assets are long term thus are expected to be used over a very long period of time exceeding a year. As they are used, they undergo wear and tear thus their value ends up being depreciated. Top find their current value, you should accumulated their depreciation value then deduct it from the original cost. All intangible assets are valued on the principle of return on investment.

You should be very careful when hiring company asset valuation services as you must get the best. They should have genuine licenses and certification that is up to date. Their reputation should be remarkable in the industry, such that they come in highly recommended by many. Moreover, they should be able to outline how they arrived at their conclusions thus ensure that the feedback they are providing is reliable and accurate for use in the company

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