What Is Accounting Valuation?

Accounting valuation refers to determining the value of an asset. Accounting valuation has an important relationship to accounting practice. Due to different circumstances, the standards for accounting valuation will also vary. Costs are generally used, but inventory is sometimes valued using the "lowest cost and market price" method. When the market price of securities is higher than the cost, market prices are sometimes used. ^[1]

Accounting valuation

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Accounting valuation refers to determining the value of an asset. Accounting valuation has an important relationship to accounting practice. Due to different circumstances, the standards for accounting valuation will also vary. Generally more

The purpose of accounting valuation is to understand the decision

Accounting valuation theory has been highly valued by Western scholars since the 1950s, especially with the

Accounting valuation methods are divided into two categories: one is the objective valuation method , and the other is the subjective valuation method .

Objective valuation methods include book value method, original cost value method, market value method, fair market value method, reproduction value method and liquidation value method. Subjective valuation methods mainly refer to discounted cash flow models. The objective valuation method is quite attractive because according to this method, the value of an enterprise is based on the value of a given asset, such as the market value of common stock, the book value of common stock, and the original cost of corporate assets Objective measurement.

The so-called subjectivity of the subjective valuation method is mainly reflected in the prediction of future cash flows and the determination of the discount rate, which has high technical requirements. The American Financial Accounting Standards Board (FASB) is clearly inclined to support the discounted cash flow model. Therefore, in its concept bulletin No. 1, it clearly states that the purpose of financial reporting is to help investors, creditors and other report users Understand the amount, timing and uncertainty of a company's net cash flow in the future. At the same time, the committee also believes that in order to achieve this financial reporting purpose, the accrual system must be adopted in the accounting system, because accrual system is more relevant to future cash flow than cash system. ^[2]