Asset Valuation Services

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Asset Valuation services

The asset valuation methodology essentially estimates the cost of replacing the tangible assets of the business. The replacement cost takes into account the market value of various assets or the expenditure required to create the infrastructure exactly similar to that of a company being valued. Since the replacement methodology assumes the value of business as if we were setting a new business, this methodology may not be relevant in a going concern. The asset valuation is a good indicator of the entry barrier that exists in a business. Alternatively, this methodology can also assume the amount which can be realized by liquidating the business by selling off all the tangible assets of a company and paying off the liabilities.

 

Special Note: Valuation services are essential in order to ensure right decisions and investments. These services come under the purview of financial services. They form an integral part of every aspect of the economic cycle as all decisions are based on accurate valuation services.

 

Asset Valuation:

 

In general, the approach should be used primarily to value the non-core or surplus fixed assets, whose value are not appropriately accounted for in the valuation by DCF or other approaches. However, in cases, where the entity has significant non-core assets and where the application of Asset Valuation approach to the enterprise is deemed necessary, following should be noted:

  1. Asset Valuation would be more realistic, if we compute the value of only the realizable amount, after discounting the non-realizable portions.

 

     (ii)  It reflects the amount which may need to be spent to create a similar infrastructure as that of a business to be valued or the value which may be realised by liquidation of a company through the sale of all its tangible assets and repayment of all liabilities.

 

Limitations Of Asset Valuation Approach

 

(i). Practically, it is extremely difficult to determine the exact replacement cost of the assets owned by a company. such as

(a) changes in technology over a period of time

(b) absence of a marketplace where such assets are or can be traded

(c) inability of the seller to be able to actually realise the value of assets in one go should the company be liquidated

(d) changes in the duty structure (like excise, import duties, etc which may impact the value of the asset over different periods of time) etc.

 

(ii) The Asset Valuation approach also does not take into account the very purpose for which a company acquired the assets, i.e., for future economic benefits.

 

(iii) The Asset Valuation approach also tends to overlook the intangible assets that a company, over a period of its existence tends to build, such as goodwill, brands, distribution network, customer relationships, etc, all of which are very important to determine its true intrinsic value.

 

 

Asset Valuation Services in India

 

Asset valuation experts have been helping the Indian masses resolve their issues for many years, arming them with the litigating knowledge and basic criteria of the transaction under the Indian jurisdiction, helping them reap maximum benefits while abiding by the law as well.