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Hi John
I am a little bit confused what is the difference between ‘net asset value (liquidation basis)’ like in requirement in above question and asset-based valuation.And if the requirement is to give strengths and weaknesses of net asset value (liquidation basis) method, shall i describe one of asset-based measures: book value or NRV?
I am lost, can you please advise?
Regards
Martahttps://www.accaglobal.com/content/dam/acca/global/PDF-students/acca/f9/specimen/f9-specimen-d14.pdf
You will have seen from the Course Notes than there are several ways of calculating an asset based valuation.
We could use book values – but the problem is that for the non-current assets, book values might be nothing like ‘true’ values (because of depreciation).
We could use realisable values (liquidation basis) – this is what the assets could be sold for individually, but that would ignore the potential goodwill.
We could use replacement values (the cost of buying the individual assets elsewhere).They are all asset-based valuations, but if the examiner wants it then he will specify which one he wants (as he has done in this question).
If he want strengths and weaknesses of liquidation basis (which obviously he did not want here) then he expects you to discuss that method (not the other ways of calculating as asset-based valuation).
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