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.

RELATED TERMS
  1. Business Valuation

    Business valuation is the process of determining the economic ...
  2. Value

    Value is the monetary, material or assessed worth of an asset, ...
  3. Terminal Value (TV)

    Terminal value is the value of a bond at maturity or of an asset ...
  4. Chartered Business Valuator - CBV

    Chartered Business Valuator is a professional designation forĀ valuationĀ specialists ...
  5. Book Value

    1. The value at which an asset is carried on a balance sheet. ...
  6. Adjusted Net Asset Method

    The adjusted net asset method is a business valuation technique ...
Related Articles
  1. Investing

    Relative Valuation: Using Stocks To Value Other Stocks

    This effective approach will help you understand which stocks you should be investing in.
  2. Investing

    Value Investing: Why Investors Care About Free Cash Flow Over EBITDA

    Examine value investing philosophy and methodology to see why free cash flow is more important than EBITDA in pure intrinsic value calculation.
  3. Small Business

    Is the Private Equity Bubble Still Expanding? (GS)

    Learn about the factors influencing valuations in the private equity market. Find out if there is a private tech bubble and if it is growing in 2016.
  4. Investing

    How to Identify Mispriced Stocks

    Find out how to identify mispriced stocks. Learn about intrinsic and relative valuation methods based on fundamentals, and technical analysis.
  5. Investing

    Market value versus book value

    Understanding book value and market value is helpful in determining a stock's valuation and how the market views a company's growth prospects in the future.
  6. Investing

    Peer Comparison Uncovers Undervalued Stocks

    Learn how to put one of the top equity analysis tools to work for you.
  7. Investing

    Discounted Cash Flow (DCF)

    Discover how investors can use this valuation method to determine the intrinsic value of a stock.
  8. Investing

    How To Value An Internet Stock

    An academic study, published several years after the peak of the dot-com bubble in March 2000, accurately described just how whacky internet valuations grew until the bubble burst. The study's ...
RELATED FAQS
  1. What can cause an asset to trade above its market value?

    Learn some of the factors that can affect the price of an investment asset and the major reasons why an asset might trade ... Read Answer >>
  2. Why is it important for an investor to understand business accounting?

    Learn to understand why it is important for an investor to understand business accounting to perform investment and credit ... Read Answer >>
  3. What is the difference between enterprise value and equity value?

    Valuating a business accurately depends heavily on the purpose of the valuation. Learn how enterprise value and equity value ... Read Answer >>
  4. How is convertible bond valuation different than traditional bond valuation?

    Read about bond valuation, particularly the differences between how a traditional bond is valued and how a convertible bond ... Read Answer >>
  5. How Are Book Value and Market Value Different?

    Book value and market value are two financial metrics used to determine the valuation of a company and whether the stock ... Read Answer >>
Hot Definitions
  1. Enterprise Value (EV)

    Enterprise Value (EV) is a measure of a company's total value, often used as a more comprehensive alternative to equity market ...
  2. Relative Strength Index - RSI

    Relative Strength Indicator (RSI) is a technical momentum indicator that compares the magnitude of recent gains to recent ...
  3. Dividend

    A dividend is a distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.
  4. Inventory Turnover

    Inventory turnover is a ratio showing how many times a company has sold and replaces inventory over a period.
  5. Watchlist

    A watchlist is list of securities being monitored for potential trading or investing opportunities.
  6. Hedge Fund

    A hedge fund is an aggressively managed portfolio of investments that uses leveraged, long, short and derivative positions.
Trading Center