What Is the Law of Increasing Costs?

The cost addition method refers to an evaluation method for determining the value of an enterprise on the basis of a reasonable evaluation of the assets and liabilities of the enterprise; the cost addition method uses an appropriate method to obtain the evaluation value of each asset of the evaluated enterprise and add up the sum A method of deducting the appraised value of liabilities to obtain the appraised value of shareholders' equity (net assets).

Cost summation

Right!

Cost summation

The basic formula of the cost addition method is:

Estimated value of net assets (value of shareholders' equity) = Sum of assessed values of various assets-Sum of assessed values of various liabilities.

Judging from the evaluation formula, using cost sum method to evaluate the value of a company generally requires the following steps:

Determine the assets included in the scope of enterprise value assessment, evaluate each individual asset item by item and add up the total value. The first is to evaluate the firm's definable assets item by item. Therefore, it is particularly important to determine the scope of enterprise value assessment. From the perspective of property rights, the scope of enterprise value assessment should be all assets. From the perspective of effective assets, in the overall assessment of an enterprise, it is necessary to correctly define and distinguish between effective assets within the scope of enterprise assets and invalid assets that do not contribute to the overall profitability. Assets that have contributed to the continued operation of the enterprise should be based on the assumption of continued use and evaluated for their useful value.

Determine the goodwill or economic loss of the enterprise. Since the business

Due to historical reasons, most companies have large assets.

The cost addition method is a summary of the valuation of individual assets. The methods for the valuation of individual assets have been introduced in detail in previous chapters. The textbook only explains the problems in the application of the cost addition method.

1. Based on the classification and inventory of the existing assets in the enterprise, the corresponding methods should be used for evaluation.

2. Foreign investment is the component of corporate assets. For example, when the proportion of foreign investment in the equity of the invested enterprise is high, the investee should be evaluated and the value of the foreign investment should be determined based on the proportion of equity.

3 According to the asset reorganization plan, as assets for lease or license use, the appraisers still have to evaluate the land use rights and trademark rights, and evaluate their rent or license fees standards.

4 When it is necessary to determine the appraised value of the company's net assets, it should also evaluate and deal with liabilities. Including the recognition of liabilities and the measurement of liabilities. The assessment of liabilities is based on the existence of actual creditors. In the evaluation process, the evaluation value is basically determined after verifying the book value in accordance with auditing standards and methods. For the assessment of liabilities, attention should also be paid to the exempt portion and the exempt portion of the company's book liabilities, as well as the liabilities that the enterprise will face or generate. In addition, the principle of debt evaluation should be consistent with the principle of debt asset evaluation in current assets.