ASSET

VALUATION
“ Asset valuation simply pertains to the
value assigned to a specific property,
including stocks, options, bonds, buildings,
machinery, or land, that is conducted
usually when a company or asset is to be
sold, insured, or taken over.

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How to value business
assets?

“Clear understanding”

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Asset-based valuation

╸ identifies a company's net assets by subtracting liabilities from assets.

The asset-based valuation is adjusted to calculate a company's
net asset value based on the market value of its assets and liabilities.

Asset Valuation – Valuing Tangible Assets

Asset Valuation – Valuing Intangible Assets

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1 COST METHODS
Lovely Cezar
What is cost method?

• Real estate valuation

• Market value
• Less reliable
• Two main types of cost approach appraisal
( a reproductive method and replacement method )

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COST METHOD
COMPUTATION

COST- DEPRECIATION+ LAND WORTH=

VALUE OF THE PROPERTY

When to use?
A. SPECIAL USE PROPERTIES
B. NEW CONSTRUCTION
C. INSURANCE
D. COMMERCIAL PROPERTY
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2 MARKET VALUE
Queenie Maglalang
What is 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.
 
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Example

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Advantages of Market
Value

╸ It is straightforward and involves simple calculations.

╸ It uses data that is real and public.
╸ It is not dependent on subjective forecasts 

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Disadvantages of
Market Value

╸ It is difficult to identify transactions or companies that

are comparable. There is usually a lack of a sufficient
number of comparable companies or transactions.
╸ It is less flexible compared to other methods.
╸ The method raises questions on how much data is
available and how good the data is.

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3 BASED STOCK
Anjelo Lladone
What is the Base Stock
Method?

The base stock method is a valuation technique for the

inventory asset, where the minimum amount of
inventory needed to maintain operations is recorded
at its acquisition cost, while the LIFO method is
applied to all additional inventory. This approach is
not acceptable under generally accepted accounting
principles.

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What is the Base Stock
Method?

- Any organization will always maintain a minimum quantity of

materials in stock.
- Such minimum quantity is called based stock.
- It is created out of the first lot purchased and is constantly valued at
that price and carried forward
- Quantity in excess of such based stock is issued and priced at FIFO
and LIFO methods.

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The Based Stock
Model

Consider the situation facing an application store that sells a particular model of
refrigerator. Because space is limited and because the manufacturer makes
frequent deliveries of other appliances, the store finds it practical to order
replacement refrigerators each time one is sold.

In fact, they have a system that places purchase orders automatically whenever a
sale is made. But, because the manufacturer is slow to fill replenishment
orders, the store must carry some stock in order to meet customer demand
promptly. Under these conditions, the key question is how much stock is to
carry.

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4 STANDARD PRICE
Chriscel Ligaya
What is standard price?

Standard costing is the practice of substituting an

expected cost for an actual cost in the accounting
records.

It involves the creation of estimated (i.e., standard)

costs for some or all activities within a company.

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What is standard price?

The cost accountant may periodically change the

standard costs to bring them into closer alignment
with actual costs.

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THANK YOU!