Accounting Valuation - Explained
What is an Accounting Valuation?
Written by J. Mance Gordon
Updated at April 18th, 2024
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What is an Accounting Valuation?
Accounting valuation is the valuation of a company's assets and liabilities for the purpose of financial reporting. Assets owned by a company and the liabilities accrued over a certain period of time must be correctly valued and included in the company's balance sheet when compiling a financial report. There are many methods of valuation of a company's assets and liabilities and they are all important for the preparation of a company's financial statement.
How is an Accounting Valuation Used?
Accuracy in the value of assets held by a company is crucial, especially for the purpose of preparation of financial statements. In accounting, diverse valuation methods exist, for instance, the accepted options model and assets price model are some of the valuation methods. The valuation of assets is also dependent on the type of asset being valued. For example, the valuation of fixed assets is based on historical price while marketable assets are valued using the current market value. However, valuation on its own is not enough for the preparation of financial statements, analysis of the valuation is likewise important. The valuation of a company's assets and liabilities can be done quarterly, monthly or annually. The information provided is used for the compilation of financial reports.