What is Asset Valuation?

Assets are belongings, either tangible or intangible, that are owned by an individual or an organization which hold certain economic value for that individual or the organization. Every individual and business tends to know the value of their assets which takes us to the practice of asset valuation.

Asset Valuation

It is the process of determining the market value of all the assets, you owned, like vehicles, trademarks, buildings, machinery, land etc. The net asset value is gained by removing the value of liabilities from the total asset value.

Valuation of Tangible Assets: Tangible assets are the assets that can be seen and touched like cars, cash and buildings. To calculate the value of tangible assets, a company needs to sort out tangible and intangible assets from the balance sheet and deduct the value of intangible assets from the total. The value of tangible assets is obtained by deducting the liabilities from those remaining assets.

Valuation of Intangible Assets: Assets that have no physical appearance are intangible. Logos and trademarks are examples of intangible assets. If a company runs out of all tangible assets, it can still be valuable by selling its logos, patents and trademarks.

Methods for Asset Valuation

Market value method:Market value method tells you the value of the asset according to the present market price value. Take an example of shares. To calculate its value via market value method, all you have to do is to go to the stock market and see its current price. 

Standard cost method:This method uses a company’s previous experience to get an expected cost which is gained by recording the variance between the real and expected costs.

Cost method: It is one of the easiest methods to calculate the value. Cost Method calculates the value of assets on the basis of the actual price for which an asset was bought. For instance, if a company bought a land for 5 million, its asset valuation will also be 5 million.

Base stock method: This method requires businesses to have a minimum quantity of inventory or stock all the time because the value is calculate according to the stock you have.

Importance of Asset Valuation

This practice holds a special importance for all companies and organizations because it tells the right value of any asset that is bought or sold. It also helps in the taxation details of all the assets. Another reason valuation of assets holds importance is that it adds transparency and details for the audit reports of the company. Many companies provide asset valuation services to companies and organizations.

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