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A22 Business Studies (Asset Valuation and Depreciation)

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1 A22 Business Studies (Asset Valuation and Depreciation)

2 Reasons for Valuation Financial reporting Bankruptcy
Transaction dealing Litigation Value the non-current assets

3 Business Assets Non-current: Land/Buildings/Premises/Vehicles/
Equipment Intangibles: Goodwill/Investments/Licences Current: Inventories/Cash/Trade Receivables

4 Asset Types Non-Current Current Tangible Inventories Intangible
Cash/Brands/Invest-ments/Goodwill Financial Trade Receivables/Prepaids

5 Funding Asset Acquisitions
Lease Overdraft Contract purchase Cash Bank loan Hire

6 Straight Line Method Assumes depreciation is charged at a constant level throughout the life of the asset. (historic cost – residual value) formula = estimated useful life of asset

7 Calculation Straight Line Method
Alternatively designated as a percentage rate (%) of Original Cost of non-current asset each year This yields same amount (£) of depreciation per year Depreciation rates give clue to estimated useful economic life, eg: 25% = ¼= 4 years; 20% = 1/5th = 5 years; 10% = 1/10th = 10 years

8 Reasons why Non-current Assets Depreciate
Usage of non-current asset Unskilled workers 3. Age 4. Technological developments 5. Becomes obsolete 6. Disaster/damage eg fire

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