Question

What would be some of the accounting issues if we compare Capitalized cash flow valuation and adjusted net asset valuation?

Answer 1

Under Adjusted Net Asset method, the assets and liabilities of the organisation are adjusted from their book value to it's fair market value. The adjustments are made to the historical balance sheet of the firm to reflect each item of asset and liability at its respective fair market value. Thus it a technique in business valuation that changes the stated values of a assets and liabilities of the company to show their estimated current fair market values better. The real value of the business for going concerns can be higher than selling its assets on a piecemeal basis, because on the balance sheet internally created products are not recorded. The exercise of intangible assets measurement is subjective and complex and subjective and can be over- or understated. The company find it difficult to do their own valuation because lacks enough distance and objectivity for making an accurate estimate the true company value.

The capitalization of Cash Flow Method it a technique in business valuation which is based on the ability to generate cash flows of company in the future. The approach is based on the assumptions made on the forecasts that can be subjective when the assumptions are not tested. A small variation in the rate will may result to a big change in the estimated value