Analyzing Complex Appraisals for Business Professionals

Chapter 17

The Asset-Based Approach

Basic Concept of the Asset-Based Approach

The basic concept of the asset-based approach is that if all the company’s assets and liabilities are revalued to current values, then the difference between the assets and liabilities should equal the value of the equity.

The asset-based approach is generally assumed to produce a control basis value. From this value, if one is valuing a minority interest, it may be appropriate to adjust for factors such as minority interest and lack of marketability. If one is valuing a controlling interest, it may or may not be appropriate to deduct a discount for lack of marketability, although it would be a smaller discount than for a minority interest.

Discrete Versus Collective ...