Imputed Value - Definition
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Imputed Value Definition
An imputed value of an item should not be confused with the actual value. An imputed value is assigned to an item when the actual value is not known, hence, this value is realized based on an assumption or estimation of the actual value. An imputed value is otherwise called an "estimated imputation." When the true or actual value of an item is yet to be determined or unavailable, a guess can be made as to what the actual value would be to realize the imputed value. The imputed value is often logical and not entirely different from the actual value.
A Little More on What is Imputed Value
Diverse situations give rise to imputed value, for instance, the unavailability of the actual value of an item might demand that an imputed value be given to the item to make certain decisions. In most cases, when companies need to make vital decisions about assets or items in the company and their true or actual values cannot determined, imputed value which is the assumed value of the items is used. Imputed values are logical values assigned to items. That is they are fair estimates or assumed values of items. The value of an historical item or an opportunity cost of an asset owned by a firm can attract imputed value. Imputed values have been used overtime and there are no problems with this.
Example of Imputed Value
This illustration is necessary for a better understanding of imputed value; A company can use imputed value in estimating the opportunity cost associated with investing in a project, especially one that has to do with using the firm's resources and assets. In this scenario, the actual cost of the project is not yet determined, so an imputed value is assigned to the opportunity cost. This assigned imputed value is in dollars, it is important in helping the company make vital investment decisions.
References for Imputed Value
- https://www.investopedia.com Investing Financial Analysis