Business Valuation and Analysis for Intangible-myassignmenthelp

Question: Discuss about theBusiness Valuation and Analysis for Intangible Assests. Answer: Main Issues The article How to Avoid Costly Business Valuation Errors by Mary Ellen Biery on 5th October 2017 talks about common errors in business valuation and how such errors could be avoided(Biery, 2017). Valuation errors are bound to occur under different approaches to business evaluation. For instance, under asset approach, if the valuer fails to identify all the tangible and intangible assets, then errors will occur. Also, valuation errors will occur if the appraiser deploys a wrong standard value when determining the value of equipment, real estate or machinery. Under market technique, frequent mistakes include using too many or very few guideline firms for the guideline-company technique. On the other hand, under the income approach, errors are bound to occur when determining risk premiums(Biery, 2017). Apart from identifying the potential errors, the author has also provided ways these errors can be detected and avoided. Firstly, there is a need for the valuing professional to have a good comprehension of the business they are valuing as well as the purpose of valuation. When the valuers pay attention to detail throughout the valuing process, they are also likely to avoid common mistakes. When it comes to error detection, the author proposes the need to review the actual progression of valuation and reporting. For instance, the appraisers can review the valuation report and the paper works deployed during valuation(Biery, 2017). Comparing the Issues to the Topics Standards of Value The standard of value deployed by the valuing professional is the fundamental supposition under which the valuation takes place. The standard value represents is the most basic guideline from the client to the valuer and tailors the valuation to the requirement of the user. Some of the standards of value include fair market value and liquidation value(Longhofer, 2013). Fair market value is the widely accepted and recognized standard of value. This is usually the willing buyer-willing seller type of value denoted as cash or cash equivalent(Erasmus Ernst, 2014). This value assumes that both the seller and the buyer knowledgeable, are risk-averse, and have competency in the running of the business. Moreover, this value is common in most types of litigation and demonstrates the price at which firms would operate in an open market. On the other hand, the liquidation value represents the net amount that will be attained if a firm is terminated and the assets disposed of using piecemeal approach(Candon, Todd, Seabolt, 2012). This value comprises of orderly liquidation value and forced liquidation value. The orderly liquidation indicates that the assets are disposed over a realistic period of time in the effort to attain best available price for every asset. On the contrary, forced liquidation denotes that the assets are sold as fast as possible(GORBUNOV A ZHIVAEVA, 2014). For instance, this can take place at through auction at one time. When applying these standards value to appraise the value of the assets, the author notes that the valuer should make sure appropriate value is deployed. However, if the valuing professional fails to apply appropriate value, then the valuation will have errors. The Role of the Business Valuing Professional The business appraisers and other accounting professionals comprehend that business valuation is a complex process and thus the chances of errors taking place are higher. When errors occur, they are costly to the sellers, buyers, appraisers and accounting personnel(Teo, Low, Doan, 2017). Therefore, apart from undertaking valuation and generating valuation reports, the appraising officials have the responsibility of ensuring that the valuations are free from errors. For instance, the appraisers have the duty of carrying out a careful review of the entire valuation process as well as reporting on an endeavor to detect errors. By doing this, the appraising professional will be minimizing the possibilities of liability that comes with business valuation(Durham, 2016). Valuation Methodologies The author of this article has also covered the approaches that the appraising official use when undertaking their work. These techniques incorporate the asset method, market technique, and income technique. The author argues that errors of valuation are bound to take place in any of this method when carrying business appraisal. Moreover, the income approach is the mostly used deployed than the other two methods because is applicable to many situations(Sharkey, 2016). Assessment of the Issues The article provides a clear elaboration of what can result in valuation error when asset approach is employed in the valuation process. For example, when appraising professional fail identify both the intangible and tangible assets when using net asset approach, then the valuation is likely to occur. The author further argues that inappropriate selection of a standard of value when determining the value of assets such as real estate, equipment or machinery, could also result in valuation errors. This information is useful in helping the valuers appreciate the importance of selecting appropriate standard of value when valuing the assets. However, the author does not provide the criteria that can enable the appraiser to select the correct standard of value. Usually, the choice of suitable standard of value is guided by the valuation purpose, that is, the intended use(Tiest, 2013). Usually, valuation errors are costly and harmful to the valuers, the company and even to the buyers and sellers(Parmentier Cuypers, 2017). In the article, the author has availed essential information that can help the parties involved in valuation to minimize the possibilities of errors occurring. For example, is the appraising professionals comprehend the business they are valuing as well as the purpose of valuation, then the chances of errors occurring will be minimal. Despite this essential, the article does little to elaborate on how the valuation errors can be detected. Comments Since the valuation process is often complex and tiring, the chances of errors occurring are quite high. Therefore, it is vital that all the parties involved in the valuation to collaborate and exercise a high level of diligence and professionalism. Moreover, the business owners have a role to undertake in to ensure that the valuation errors are reduced or avoided. For example, the companies should seek the services of qualified personnel to conduct valuation. The companies can also help to detect the errors by examining the scope of review and assessing the suppositions used in the report. References Biery, M. E. (2017). How to Avoid Costly Business Valuation Errors. Retrieved April 28th, 2018, from https://www.accountexnetwork.com/blog/2017/10/avoid-costly-business-valuation-errors/ Candon, J. R., Todd, K., Seabolt, D. (2012). Business valuation and forensic accounting : for resolving disputes in Hawaii. Bloomington, IN : AuthorHouse. Durham, C. J. (2016). Understanding the basic business valuation methods. Control Engineering, 63(12), 24-24. Erasmus, P., Ernst, D. (2014). International business valuation. Konstanz : UVK-Verl.-Ges. ; Mu?nchen : UVK Lucius. GORBUNOVA, N. A., ZHIVAEVA, M. A. (2014). COMPARATIVE ANALYSIS OF ACCOUNTING AND FINANCIAL APPROACHES TO COMPANY VALUATION. International Accounting, 46-55. Longhofer, R. S. (2013). Business valuation. New York: Law Journal Press. Parmentier, G., Cuypers, B. (2017). Business valuation : using financial analysis to measure a company's value. Cambridge: Intersentia. Sharkey, Z. M. (2016). Business valuation for business owners. Lexington, Ky: Zachary M. Sharkey. Teo, E. K., Low, B. S., Doan, J. T. (2017). Business valuation. Singapore : Cengage Learning Asia Pte Ltd. Tiest, R. (2013). Business valuation for small and medium-sized companies : due diligence and valuation techniques. Antwerpen : Intersentia.