We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What is Asset Valuation?

Mary McMahon
By
Updated May 16, 2024
Our promise to you
SmartCapitalMind is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At SmartCapitalMind, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject-matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

Asset valuation is a procedure in which the value of an asset is determined. This is done in order to confirm that the value is reported accurately and appropriately on balance sheets. If assets are not valued properly, it can create a skewed value in accounting documents which can in turn lead to failure on an accounting audit, problems with tax liability, and other issues.

In some cases, assets are relatively easy to value. For example, if a company holds stock in another company, it can look at the current trading price of that stock at set intervals for the purpose of an asset valuation. Likewise, assets such as bonds and other securities can be valued because they have publicly listed and reliable values.

There may be other types of assets which have more unique and dependent valuations. In these cases, asset valuation becomes more complicated. Intangible assets such as copyrights, for example, are difficult to assign value to. Likewise, assets such as real estate require an evaluation of comparable real estate and current market conditions in order to arrive an accurate and reliable valuation which reflects the fair market value of the asset in question.

If assets are overvalued, a company may appear to be worth more than it is in its public reportings. Undervalued assets, on the other hand, set a company up for a abnormally low value and can create problems with tax liability because tax authorities may determine that the assets are undervalued and recalculate a company's tax due in light of this information. Repeated errors on asset valuation can also bring up suspicions of fraud, rather than innocent errors.

Finding the current worth of an asset may require the assistance of someone who specializes in asset valuation. These financial professionals can review the documentation associated with an asset, examine the asset itself if necessary, and use their experience along with standard accounting practices to arrive at an accurate, current, and fair value for an asset.

This process is especially critical in cases where companies are preparing to make an initial public offering or are negotiating with other companies in an acquisition or merger deal. In these cases, scrupulous evaluation of company assets and the value of the company as a whole is an important part of the deal. This information may also be reviewed and audited by regulators and government officials for the purpose of confirming that it is correct.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Mary McMahon
By Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a SmartCapitalMind researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

Discussion Comments
By sunnySkys — On Jul 10, 2011

@indemnifyme - Excellent point.

I think hiring an asset valuation specialist is a good idea when a company is having trouble assigning value to their assets. It's probably even a good idea when the company doesn't think they're having trouble with this.

Asset valuation sounds like it's not an area where any business should mess around. The potential problems sound much too great!

By indemnifyme — On Jul 10, 2011

When assets are undervalued it can create a problem with insurance as well. Most insurance policies insure something for a certain amount of money. For instance most homeowners policies give a certain amount of money for liability and a certain amount for personal property. The same goes for business insurance.

If the assets of the business are undervalued the business may not purchase enough insurance. Then in the event of a loss once everything is appraised by the insurance company the insurance policy may not cover the amount the assets are really worth. This could be extremely damaging for a company.

Companies should definitely make every effort to ensure that their asset and property valuation is correct. This will allow them to adequately protect themselves in case of a loss.

Mary McMahon
Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a...

Learn more
SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.