Valuation of various types of assets - what are the differences?

Dawid STOLAREK
Corporate Finance Manager at RSM Poland

Throughout the course of your business and the transactions you make, you will come across assets of various types and features. Ensuring liquidity of assets depends on whether you are able to determine their value in terms of money. However, there are other reasons why preparing a valuation of assets may prove necessary - transaction goals (trading a certain good) being only one of them. Most often, valuation of a given asset is prepared in connection with reporting requirements or to serve as an opinion in on-going court proceedings. Valuation is also used in management of certain assets as a tool for identifying factors that promote the growth of their value. In business practice, three main types of assets that are most commonly the subject of valuation may be distinguished. These are:

Enterprises,
Real estate,
Non-material assets (most notably – trademarks).

The necessity of using estimates, and therefore preparing a valuation, is in the case of many types of assets the result of limited access to information on their actual value from an effectively operating market. A very large group of assets used in business operations is characterised by features that make them definitely unique. This uniqueness relates primarily to the gain expected from using the assets and the risk that follows.

So what are the differences in valuation of the above-mentioned groups of assets? How do their features influence the quality of the valuation? What is to be kept in mind when interpreting the obtained results? Below you will find a summary that may be considered an executive presentation of key issues related to valuation of enterprises, real estates and non-material assets. The summary does not elaborate on the various methods applied in valuation - this being perhaps a good subject for our next blog entry.

	Real estate	Enterprises	Non-material assets
Requirements in the scope of possessing certain professional qualifications	YES	NO	NO
Reference to market data	YES – applies for both expected flows and the risk of their occurrence	YES, but only to a limited extent	Usually difficult to perform due to poor data availability and significant differences in the evaluated assets
Assessment certainty	High	Medium	Posing significant risk
Availability of information used in the valuation	High	High	Incomplete - which is reflected in, among others, the differences in applied methodology
Weryfikowalność	High	Limited	Limited