What Is Imputed Value?
Imputed value, also known as estimated imputation, is an assumed value given to an item when the actual value is not known or available. Imputed values are a logical or implicit value for an item or time set, wherein a "true" value has yet to be ascertained.
An imputed value would be the best guess estimate used to forecast a larger set of values or series of data points. Imputed values can pertain to the value of intangible assets owned by a firm, the opportunity cost associated with an event, or used for ascertaining the value of a historical item for which facts about its value at a past point in time are not available.
- Imputed value is a calculated estimate of value produced when a direct or explicit value is unavailable or impossible to obtain.
- Imputed values may be given to intangible assets held by a firm, such as the value of a patent or other piece of intellectual property.
- Because imputed values are only estimates or forecasts, they may be subject to error. One should heed imputed values with caution when evaluating a company's financial statements.
Understanding Imputed Value
Imputed values can be used in a variety of situations. These include opportunity cost associated with an event, intangible assets owned by a firm, or the value of a historical item for which facts about its value at a past point in time are not available. Additionally, data points in time series data may require estimations to complete a full range of figures. So long as the imputed values are fair estimates, there are typically no issues with their use.
Imputed values may also be used in computing economic data such as gross domestic product (GDP). In order to represent a comprehensive picture of economic activity, GDP must include some goods and services that are not traded in the marketplace. Those components of the GDP are called imputations.
Examples include the services of owner-occupied housing, financial services provided without charge, personal consumption expenditures (PCE), and the treatment of employer-provided health insurance. Imputations approximate the price and quantity that would be obtained for a good or service if it was traded in the marketplace.
Similar to imputed value is imputed cost. An imputed cost is one that is incurred by virtue of using an asset instead of investing it or undertaking an alternative course of action. An imputed cost is an invisible cost that is not incurred directly, as opposed to an explicit cost, which is incurred directly.
Example of Imputed Value
For example, assume that XYZ company chooses to invest in project A over project B, that choice has an opportunity cost associated with it. The actual dollar cost assigned to that opportunity cost is an imputed value since it is impossible to ascertain the actual amount of the opportunity cost by measuring it.
The value of a patent held by ABC company is an imputed cost. It can be estimated how much additional business or revenue has been brought in by owning the patent and how much the value of the company has increased as a result, but it is not possible to measure it definitively in hard dollars.