Business Valuation

CHAPTER 8Asset Approach and Methods

PYRAMID STEP 8 Assess and apply asset values.

Several methods fall under the asset approach, including the adjusted net asset and excess earnings methods. The focus of this step in the pyramid is on the key elements that indicate when to use an asset approach and what the requirements are under the various methods. In addition to the adjusted net asset method, there are also hybrid methods that can be considered under the asset approach to assist in identifying goodwill and intangible assets.

Note: The asset approach is step eight of the valuation process pyramid above and should be performed in conjunction with the preceding steps. The application of the methods under the asset approach is presented before the income and market approaches and methods, but this placement does not mean that it must or should be calculated before consideration of the other approaches and methods. In general, the approaches and methods should be considered after developing a thorough understanding of the purpose of the analysis, the nature and history of the business being valued, and its qualitative and quantitative value drivers.

Learning Objectives

By the end of this chapter, readers should be able to:

• Develop a solid understanding of the asset-based approach to valuation, including its underlying principles, appropriate applications, and how it contrasts ...