Tangible Assets are those assets possessing physical attributes such as land and buildings, plants & machinery, equipment, inventory, IT hardware etc. In addition to tangible assets, there are also fixed operating assets lacking physical attributes. These are known as Intangible Assets. They can include are goodwill, patents, copyrights, trademarks, and more.
Tangible assets (excluding land) may have a limited lifespan of anywhere from 5 years to 15 years before becoming obsolete. Their value is dependent on characteristic of these assets. Said values can decline to zero, or hold on only to some small salvage value. In accounting terms, this decline is known as “Depreciation”. Similarly, Intangibles assets can also have definite or indefinite lifespans. In this case, the decline in value is known as “Amortization”.
Both Tangible and Intangible assets are fundamental parts of any business. Industries with a high proportion of intangible assets include technology, healthcare, and entertainment and media. As you might imagine, the valuation of intangible assets is more difficult than that of tangible assets due to the uncertainty of future benefits . A company’s valuation is highly influenced by worth of its underlying assets, whether tangible or intangible. The best way to form an accurate understanding of value is to seek out professional evaluation, because every asset is unique in its condition and utility.
Today’s global business environment has increased the importance of transparent and robust valuations meeting regulatory, accounting, and financial reporting requirements. Assessing and justifying the value of assets is more complex and crucial than ever.
Know the difference between tangible and intangible assets? Learn More.
Purpose of Operating Fixed Assets
- Financial Reporting
- Asset Monitoring
- Tax Planning
- Impairment Testing
- Purchase Price Allocation (PPA)/Financial Accounting
- Corporate Restructuring
- Replacement Budgeting
Importance of Tangible Asset Valuation:
- Helps to determine if a company possessing primarily tangible assets is overvalued or undervalued. This is done by comparing values of net tangible assets per share to current share price of the company.
- Identifies a potential measure of liquidity, as a company with a high net tangible asset value has low risk in terms of liquidity. Therefore, tangible assets can serve as collateral to get short term and long-term credit.
- Assists companies with accessing capital requirements for replacement or maintenance of existing tangible assets, and with investing for future growth.
Veristrat can value even the most unique tangible assets, learn more.
Commonly used methods for Tangible Assets Valuation:
- Appraisal Method: An appraiser determines the fair market value of assets by considering their current condition, including wear and tear, expected lifespan, and degree of obsolescence.
- Replacement/Reproduction Cost: The replacement cost identifies the potential cost of purchasing an asset with the same functions as the one it’s intended to replace in line with updated materials and standards. The reproduction cost states the cost which might be incurred in order to create an exact replica of an asset, even with obsolete materials and standard.
- Liquidation/Salvage Value: An assessor determines the fair value of an asset when the company gets liquidated or if the asset is no more usable.
How can we support you?
Our experienced and dedicated team provides fundamental technical assistance pertaining to Operating Fixed Assets.
Valuation of tangible assets for determining fair value, tax planning, financial reporting, insurance matters, solvency matters, bankruptcy filing, or any other legitimate purposes.
We provide physical verification of on-site assets for the purposes of transaction due diligence, audit services, and regulatory compliance.
Capital Budgeting and Accounting
We closely analyze existing accounting and asset utility in order to provide unbiased opinions on effective accounting and capital budgeting strategies.
Estimation of Asset Lifespan
With in-depth study, we can identify factors influencing the approximate lifespan of a tangle asset before depreciation may be expected to occur. This information is essential for company’s financial and tax disclosures.
Valuation of Operating Fixed Assets is necessary in order for a business to properly account for tangible and Intangible assets. This especially important for the transfer of a title in sale, as well as for the purchase of assets, lease structuring, obtaining credit, settlement of dues in times of distress, valuation for tax or other purposes, insurance, liquidation etc.
At Veristrat, our holistic approach to tangible assets valuation enables us to deliver accurate and timely results. We believe that assessment of Operating Fixed Assets requires a logical and measurable approach. Our dedicated team offers wide range of strategic solutions for tangible assets in addition to valuation, including physical audit, ascertaining useful life of assets, asset componentization etc.