Asset Valuation – Valuing Intangible Assets

Intangible assets are assets that take no physical form. They may include
patents, logos, franchises, and trademarks.

Say, for example, a multinational company with assets of $15 billion goes
bankrupt one day, and none of its tangible assets are left. It can still have
value because of its intangible assets, such as its logo and patents, that many
investors and other companies may be interested in acquiring.

To learn more, check out CFI’s Business Valuation Modeling course.

Methods of Asset Valuation

Valuation of fixed assets can be done using various methods, which include
the following:

1. Cost Method

The cost method is the easiest way of asset valuation. It is done by basing the
value on the price for which the asset was bought.

2. Market Value Method

The market value method bases the value of the asset on its market price or
its projected price when sold in the open market. In the absence of similar
assets in the open market, the replacement value method or the net realizable
value method is used.

 
3. Base Stock Method

The base stock method requires a company to keep a certain level of stocks
whose value is assessed based on the value of a base stock.

4. Standard Cost Method

The standard cost method uses expected costs instead of actual costs, often
based on the company’s past experience. The costs are obtained by recording
differences between expected and actual costs.