Valuation for Business Assets

Business Valuation Business and stock are appraised by certified senior valuers. The value of the stock or the appraised value of the business all shares similar meanings. The enterprises under the business operations of an organization or company will have a different business value which depends on past performance or differences in assets held by that organization that are not the same regardless of whether they are tangible and intangible assets. For your information, in some organizations, the intangible assets may even have a much higher value than the real estate which the business value will be difficult to compare. However, businesses that operate in the same industry may have comparable standards in some areas. In this case, the 2 most common valuation methods when it comes to business valuation are: First, the adjustment of accounting costs which will be based on the assets held by that organization such as both tangible and intangible assets. The tangible assets can be real estate, land, buildings, machinery, equipment/tools, inventory, etc. including adjustment of cash status. On the other hand, the intangible assets can be brand/trademark, license software, patent, concession, various rights of claims, goodwill, etc. When receiving the complete set of assets according to the list, the business valuation will be conducted by referring to the current conditions. The next step is to appraise using the ‘Income Approach’ by referring to the past performances of the business which will be analyzed together with competitors in the same industry. Modify some of the important factors to suit the operations and market share status as well as analyze the strengths and weaknesses of the business operation. By doing these, it will allow you to project the cash flow that will be the future performance and ability to know the current business value using the income approach to be able to compare the result with the one calculated by the ‘Cost Approach’. For your information, some of this information will be received from interviewing the business owner together with some additional reference documents to be requested. Reviewing the appraised value of a business may also use performance indicators of competitors in the same market and industry or by comparing with companies in the stock exchange that are in the same industry in P/E P/B, etc. Click! Fill out the business appraisal questionnaire

For the financial purpose of financial reporting no. 3 (revised 2015) when there is an opportunity to purchase or merge the business. In each event, the overall selling price will most likely be higher than those real estate properties. If that is the case, it means that the executives of the company or organization have a long vision by forecasting and predicting the property and asset value further than the current or existing value that the accounting department must proceed further action in terms of finding the property value by allocating the purchase price and record in the account to be as close to the purchase price as much as possible. Finally, if there are still differences that cannot find assets to be allocated in, this will be recorded as goodwill. Normally, the business assets that should be brought to adjust to present value (Adjust Book Value) are divided into 2 parts which are: Tangible Assets – Real estate that is an establishment and an investment property Machinery, production equipment, and support Raw materials before entering the production process Products in the production process Inventories and products during delivery to the destination Account receivables and cash Intangible Assets – Brand name or Trademark Copyright, patent, and concession card Rights of claim Leasehold rights Agency contract Production formula/secret recipe Technology/Know-How Skill Labor Software license Customer List Goodwill **Prospec Appraisal Company is an expert in real estate appraisal for tangible and intangible property for the entity to be used as part of the purchase price allocation report. For auditors’ use of accounting records, clients are advised to review the job offer between the property appraisal report and the PPA report separately before acquiring the service.**

Assets that are recorded in the business or company accounts as the list of asset categories which consist of both, tangible and intangible assets. There is an opportunity that these will be brought out for valuation by splitting each item or to appraise the whole business depends on the purpose of use.  Tangible assets are something that can be visualized and touched for example land, buildings, lease, machinery, equipment, vehicles, furniture, improvement, decoration, raw materials, products during the production process, inventory, trade receivables, computer equipment, etc.   Intangible assets include trademarks, brand, customer database, software, program, production formula, copyright, patent, petty patent, claims, lease agreement, concession, etc. By considering the assets usage in the business, we may identify if they are categorized as core assets and non-core assets, which have implications on the valuation method consistent with the accounting standards, etc. There are several reasons in order to bring the assets within the business to be appraised such as if there is an adjustment in the accounting structure which may be due to a change in shareholder structure, trading of merged shares at the level that the account will need to be restructured. In this case, the price must be adjusted within the accounting records of all types of assets to be present. Then, record the PPA split account, leaving the difference that is goodwill to a minimum which may be able to search for some intangible assets for further valuation if necessary under the basis of reality, for example, customer account, software, etc. Property appraisal in preparation to use certain assets as collateral for loans under the Business Security Act 2015, between the collateral provider and receiver is also popular nowadays. Therefore, the assets valuation within the business that is appraised separately will be as popular, especially the intangible assets that are taken out to appraise for the preparation of the list of quick and easy access to funding sources. However, the appraisal of assets within the SME or Startup businesses to prepare for a roadshow with the capital groups that support the growth of the new businesses is also part of making property valuation for the new business group to form a shape and finally, in the level of business negotiations which is an advantage that must be prepared.

Client’s database or account is enormously valuable. Business without tangible assets can still be valuable and attractive in the eyes of investors and potential joint-venture due to their big customer portfolio. It can be considered as one of the most important things of the business organization which can be divided into 5 levels as below: Target customers who never used the product or service but have enough information to make marketing and become the customer. Customers who used the product or service, contact details stored and have a high returning possibility. Customers who currently use the product or service. Customers who work have been successfully delivered in which the payment can be billed. This type of customer might be similar to the one with an accounting system called ‘debtor’. Customers who use the product or service regularly, in another word, ‘member’. Any business that proves to have a definite client account, can be brought to the table for client database valuation!

Franchise valuation can be approached from two ways, one is as an owner of the franchise, also known as ‘Franchisor’. Second is as the ‘Franchisee’ who is basically the person who pays the money to the Franchisor for buying their franchise and managing, or even ‘Master Franchise’ who looks after the benefit of franchising by finding and matching the right franchisee.  Therefore, the purposes of this type of property valuation can be for example to know the value of the franchise in order to sell, franchise package management, to know the price of each franchise level or even master franchise who might want to know the total business value of the entire business. Franchise valuation can be done by using 2 valuation methods which are ‘Cost Approach’ and ‘Income Approach’ which the main factors to take into consideration are managing system, supply system, raw materials, and leasehold rights.

Usually, a business valuation will be a thorough inspection for those who desire to know the business value in the level of hope that must be ensured in terms of the business joint ventures such as merge or takeover in which there will be involvement with many interested parties. When conducting due diligence together with a business valuation, the inspection will have a very wide scope in general so it is necessary for the customers to specify the scope of their needs which normally, we will check the accounting transaction as a basis. This also requires the expertise of the certified auditors. However, this depends on the clients whether they require a certification from the licensed auditor or not. The other inspection includes contracts that have an impact on business income and the effect of the obligation with regard to the cost of a labor contract as well as the binding effect on properties and assets, all claims that may be filed on the court or may be prosecuted at the level of a limited company or even deeper to the level of shareholders and current/previous board of directors who wants to know the amount of damage that must be reserved for accounting as back up. In case of wanting to know more or in detail for example impacts of state law, environment, and mass are considered as a special case which can also be done. A 100% detailed asset counting service is also considered as part of the due diligence service.