Principles Of Valuation

Note that the principle of NNEI is recognized (not only American, but also international, European and domestic standards) as fundamental to the definition of the market value of the property. However, one should keep in mind the need to apply this principle when determining the market value of a business. Here, the algorithm for selecting the NNEI option is fully implemented if a controlling (and 100%) stake is evaluated (with a focus on market preferences and potential buyers), and partly when evaluating a minority stake (only all the intentions of the board of directors and the management of the company are taken into account including intentions adopted at the suggestion of the appraiser). Let us note the potentially positive consequences encountered in the practice of business:

A consolidation proposed by the appraiser and accepted by the management of the production departments of a small enterprise – with the provision of premises for renting (in order to generate additional income);

The release of a part (about 30%) of premises for leasing realized by the management of a large enterprise;

Proposed by the appraiser and management’s change in the staffing of the employees of a small enterprise;

The construction of a new warehouse building planned by the management and accounted by the evaluator as part of the logistics complex;

Proposed by the appraiser comparison of options for technical re-equipment of the enterprise using borrowed funds or leasing;

As you already know from my previous articles, property valuation is a mandatory, statutory procedure for determining the real, market value of property valued at the time of the valuation, presented in monetary terms.

Property valuation is performed by the subjects of valuation activity (independent professional appraisal experts) who, in accordance with accepted methods, rules and valuation methodologies, carry out an assessment and provide an act of property valuation.

Depending on various factors, namely, on the type of property being valued (for example, this is a house, apartment, land, enterprise …), on the purpose and purpose of assessment (taxation, insurance, accounting …), each expert evaluator applies some, or other methods, techniques and rules for evaluation.

Methods for assessing the property of an enterprise are those methods and rules that an expert appraiser uses to determine (establish) the real market value of an enterprise in monetary terms.

There are a large number of methods for assessing the property of an enterprise, all of which are legally established and are described step by step in laws, regulations, standards and rules for performing valuation work.

Along with the three main methods of valuation, which are profitable, comparative and costly, in modern valuation activities, appraisers may use other methods, depending on the goals and objectives of the property appraisal being carried out, such as:

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Asset accumulation method;

Net asset method;

F PROPERTY:

Determining the value of the property in accordance with the goal, the valuation procedure, taking into account all the influencing factors on the evaluated object.

By property means possessing objects of possession or use of individuals or legal entities, that is, a set of property rights of a particular legal entity or individual.

Property complex:

A complex of property rights of a legal entity, to all objects involved in the implementation of business activities.

Valuation of an enterprise’s property is a procedure for determining market value, creating a classification of existing assets, prospects for use and identifying the most efficient operation of an object — the result is directly dependent on the goal.

The valuation of the property of an enterprise, not only in Russia, but also in other developed countries of the world, is one of the mechanisms for competent and rational management of the property of a legal entity. Anyone who has ever dealt with the issues of property sale, investment in it, was perplexed by the problem of its value.

For whom is an enterprise property valuation beneficial? 

The potential buyer and seller (both individuals and legal entities) are interested in assessing the property of the enterprise in order to determine the most fair value of the sale, exchange or other alienation of the object of the transaction;

Creditor:

The cost provided as a result of the assessment helps to make a decision on granting a loan to the organization;

The landlord:

If necessary, determine the rental rate, taking into account the market value of the rental