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Contingent Assessment Essay

In business, it is imperative to know the value of certain assets. Asset values are necessary, for it is one of the factors that will be taken into consideration when buying or selling properties. There are different valuation methods that can be used to come up with the value of the said assets.

Some of the common valuation methods are: Asset Valuation, Capitalization of Income Valuation, Capitalization Earning Approach, Cash Flow Method, Cost to Create Approach, Debt Assumption Method, Discounted Cash Flow, Excess Earning Method, Multiple of Earnings, Multiplier or Market Valuation, Owner of Benefit Valuation, Rule of Thumb method, Tangible Assets (Balance Sheet) Method, and Value of Specific Intangible Assets.

Discretionary method or Discretionary Earning method is used to account the value of small business, for most of the transactions in these businesses are base on asset sales. Assets are clearly stated whether it would be part of the resulting indication value or not. Values of equipment, furniture, and other item alike are included in the indication of values. So are lease of land and materials, and other intangible assets.

Contingent valuation on the other is a method to use to asses values of non-use and non-market aspect, such as environmental services.

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Contingent valuation method involves asking respondent some question much like in a survey. The answers that people provide are used to assign monetary value to certain assets like non-use environment values. Since contingent valuation relies on the response of people, controversies arise in the integrity in the value that was given to an item.

Both Discretionary and Contingent valuation are alike some ways. They can both be used to assess intangible assets. They are also not recommended to be used alone as method in valuing assets. Their major difference is that Contingent Method relies on people response while Discretionary Method assesses the value of an asset base on market value.

References:

Breedlove, J. (June 21, 1999). RL30242: NaturalResources: Assessing Nonmarket Values Through Contingent Valuation. Retrieved October 9, 2007, from

http://www.ncseonline.org/nle/crsreports/natural/nrgen-24.cfm#The%20Contingent%20Valuation%20Method

Pratt S. P., Reilly R. F., & Schweihs R. P. (1998). Valuing Small Business & Professional Practices. Retrieved October 9, 2007, from

http://books.google.com/books?id=pSSZgi4tr1kC&dq=Valuing+Small+Business+%26+Professional+Practices

 

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