Asset Valuation

Asset Valuation:

Asset valuation is undertaken for a number of purposes. For example, an asset valuation may be used to: generate the information needed for internal control, resource allocation and performance assessment, establish the basis for asset realisation, determine insurance cover and risk exposure and meet requirements for external financial reporting. Asset valuation methods used should be in accordance with the guidelines issued by your countries Department of Finance.

Choice of an appropriate asset valuation method depends firstly on the purpose of the valuation, and secondly on the nature of the asset involved. The asset valuation is applied at the time of acquisition, and generally corresponds to the cost of acquisition. Subsequent revaluations are undertaken at periodic intervals with a frequency chosen to reflect the nature of the class of assets concerned.

A core asset should be valued at the cost of replacing the service potential remaining in the asset. If a viable market exists for the asset, a core asset valuation is to be valued at its current market price. If a market for the asset does not exist, a core asset is to be valued at its written-down replacement cost. A non-core asset is to be valued at its net realisable value, which is the current market value net of all costs involved with disposing or redeploying the asset valuation.