DEFINITION of 'Accounting Valuation'

Accounting valuation is the process of valuing a company's assets and liabilities for financial reporting purposes. Several accounting-valuation methods are used while preparing financial statements in order to value assets. Many valuation methods are stipulated by accounting rules, such as the need to use an accepted options model to value the options that a company grants to employees. Other assets are valued simply by the price paid, such as real estate. Typically, fixed assets are valued at the historical price. Marketable securities are valued at the current market price.

BREAKING DOWN 'Accounting Valuation'

Accounting valuation is important because the value of assets on a company's financial statements needs to be reliable. Analysis of this valuation is just as important as the valuation itself. Some assets, such as real estate, which is carried at cost less depreciation, can be carried on the balance sheet at far from their true value. Securities the firm owns for its own investment portfolio versus trading will have their own rules for valuation as well, as will bonds held for investment or trading.

The updated quarterly or yearly information is made available in the form of financial statements and can be found in the investor relations area of most publicly trading firms' websites.

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