Why the asset value in valuation report is different from the book value on annual report?

Accounting: Balance Sheet

The formula of the balance sheet:

Assets = Liability + Equity

As per Damodaran, there are 4 elements under asset:

·???????? Fixed assets

·???????? Current Aset

·???????? Financial Investments

·???????? Intangible Assets

You could refer to the liability and Equities from the chart below:

To download the guideline writeup

?????????????? and put your ???????????? in the comment below?

Book value (Company):

The book value of the company is theoretically?the amount of money that would be paid to?shareholders?if the company was liquidated and paid off all of its liabilities.?It is also recorded as equity value.

But this article will focus more on the permanent asset perspectives

1) Book Value of the Asset:

The book value of an asset refers to its cost minus depreciation over time.

It is the value of an asset based on its balance sheet.

2)Fair Value:

The fair value of an asset reflects the price possibly agreed upon between a buyer and seller based on their own judgment. It is on a willing seller and willing buyer basis.

Fair Value - the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

?Fair Value, an accounting concept, is defined in MFRS 13 (Fair Value Measurement) issued by the Malaysian Accounting Standards Board (MASB) as

Fair Value of an asset or liability shall be measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

?

Fair Value is generally used for reporting both market and non-market values in financial statements. Where the Market Value of an asset can be established, this value will equate to Fair Value. Therefore, the definition of Fair Value in MFRS is generally consistent with Market Value.

?

However, Fair Value is based on market participants and in an auction, it represents the second highest bidder and thus is lower than Market Value which represents a willing buyer only as against a willing buyer and a willing seller for Market Value.

?

3.Market value:

While the Market value is the value determined using Approaches and methods outlined in Malaysia Valuation Standard 2019. The following are the definition:

Market Value - the estimated amount for which an asset or liability should be exchanged on the valuation date between a willing buyer and a willing seller in an arm's length transaction after proper marketing and where the parties had each acted knowledgeably, prudently, and without compulsion.

Following are the definition of Market Value as per Malaysia Valuation Standard 2019:

Applications

Valuer must be able to differentiate that our main task is to give our opinion of the value as per requirements of clients.

Out of these 3 values, most often we were required to determine Market Value. ?As they are market-driven.

Which one to use?

It depends on what our clients want. If they want to know the real picture of their business so that the business decision to be done align with the real market situation, then Market value is what they need.

But if the figure is to be used in Financial reporting, then they have to discuss with their accountants for the respective advice.

We should be clear on our capacity and not act beyond our lines.

To download the guideline writeup

?????????????? and put your ???????????? in the comment below

The above points are just my personal view. Feel free to share with me your view