Types of value in valuation activities

Cost is one of the key characteristics of the subject matter of a civil law transaction. What are its signs? How are prices classified? For what purpose in business or in realtor business are calculated the relevant indicators and through what methods?

What is "value" and "valuation"

Before studying the types of value and the concomitant grounds for its classification, let us determine what it is. Criteria that would allow it to give an unambiguous description, among the world and Russian economists quite a lot. Among the most popular is the following: value is a sum of money that is established as a condition of a transaction in the process of interaction of subjects of civil relations at the anticipated moment of transfer of property rights or other mechanisms for using the object. In turn, the concept of "valuation" is related to the mechanism for determining the amount in question.

Evaluation aspects

Objects of valuation can be real estate, services, transportation, household items, intellectual property - all that is provided by civil law as a possible subject for transactions involving natural persons and legal entities. The procedure associated with the determination of the monetary value, the transfer of which from one subject of legal relations to another is the basis for the transfer of property rights, is carried out through methods recognized by both parties. They can also be offered by third parties, but subject to agreement with the main parties to the transaction.

These or other types of value of goods, property or services can be determined, depending on the nature of legal relations, at the request of the parties or by virtue of the requirements of the law. So, for example, when dealing with real estate, access to the services of appraisers is, in many cases, mandatory for registration of ownership.

Approaches used in the assessment

Evaluation, as well as, for example, the determination of the type of value, can be carried out within the framework of various approaches. In Russian business practice, there are three main ones: profitable, comparative and costly. Let's consider their essence.

An income model involves the use of methods that are based on calculating the expected revenue from the possible use by the new owner of the valuation object - for example, leasing. Comparative model involves the study of figures that characterize the types of value of property of some objects, with indicators of others, very similar in basic characteristics. For example, the appraiser, when determining the appropriate monetary indicator for an apartment, usually studies existing proposals in the real estate market. In the framework of the cost model, the possible costs are calculated, which are necessary from the point of view of maintaining the object in the proper functional state. If, say, a person buys a tractor, the evaluation expert hired by him should , taking into account the cost of the given mode of transport, take into account the potential costs associated with the repair of equipment.

The result of the valuation

Once the property values have been analyzed, and the corresponding valuation is given, its result can be used as a guide to determine the final price of the transaction. Or for other purposes - for example, when concluding an insurance contract, granting a loan, selling a stake, etc. Let us consider which Russian experts identify the types of value in the assessment of various facilities. And also how can relevant information be used in practice.

Classification of values

What types of value of an object of evaluation are distinguished by modern experts? There are a lot of criteria for classification here. Consider one of the most common models among Russian economists.

In it there is, in particular, market value. This is a price, the value of which is fixed at the time of valuation of the object, provided that it is expected to be sold in a competitive segment. That is, the mandatory conditions for determining the correct cost - the availability of public information about the principles of product pricing, the absence of significant external (regulatory) factors affecting the price.

There is investment value in the model under consideration. Its indicators are identified for the purpose of providing information to those who are interested in investing in an object. In some cases, the investment value may coincide with the market value. But it is not always the case. Sometimes, simultaneously with the investment, the liquidation value of the object is also calculated. Its value expresses the probable size of the possible proceeds from the resale of the subject matter of the transaction.

There is a cadastral value. The purpose of its establishment is the entry of an object into a certain state or industrial register with the subsequent use of information by the relevant statements. As a rule, we are talking about the calculation of taxes in this case. The cadastral value is usually lower than the market value, if we talk about real estate, or approximately equal to it.

There is also such a thing as insurance value. It involves calculating the amount of payments under the insurance contract. In some cases, simultaneously with it, the replacement cost of the object is also calculated. This happens, for example, if the corresponding agreement with the insurance company means not monetary compensation, but bringing the object to its original functional state after the damage or failure.

Thus, we examined 4 types of value, which are most common in the Russian economic school, as well as several complementing them. This list is, of course, not exhaustive. There are private types of market value, as well as investment, or cadastral, relating to the characteristics of objects with different, as an option, legal status. Now we turn to the study of the essence of objects, in relation to which the corresponding parameter is calculated in the aspect of practical significance.

Business valuation

Of course, there are a lot of concrete types of objects in respect of which value is determined. Among the most common in Russian business practice is business and real estate. In the first case, the totality of the firm's assets, management principles and activities generating profit are estimated. Before studying the types of enterprise value, it will be useful to determine the goals that the subject of the relevant evaluation faces.

Why determine the cost parameters for a business? The first option here is the prospects for the sale of the enterprise. The owner of the firm can decide to do another business, but before it is profitable to transfer the current to the hands of another owner. Also, business valuation can be performed to improve the quality of company management, identify possible shortcomings in the management system. Another option is to attract investors' attention if there is not enough working capital or the firm is tasked with expanding the market, so there is a need for additional funds. Business appraisal can be carried out when making a loan - it is, as a rule, serves as a guideline for making a decision on loan issuance by a bank.

Valuation of business

What types of costs are involved in the valuation of enterprises? What principles are most commonly used here? The main types of value that are applicable to business valuation are market and investment. According to some experts, considering the possibility of buying an enterprise, it would be advisable for the partner to focus on the second direction in analyzing the relevant prospects. Since a typical "market" price for business is an indicator that does not always speak of the enterprise's development potential unambiguously. But if we are talking about identifying it, the key principles of calculating the right figures can be based:

- on the comparison of the available indicators with those characteristic of other market participants;

- studying the competitive advantages of business;

- on the subjective vision of the evaluators;

- on the study of the influence of external factors.

If it is a matter of determining the investment value of a business, then the same principles can be applied, but in addition to them it is also permissible to involve a number of others:

- modeling of behavior of the subjects involved in business (influence of factors);

- calculation of profitability (increase in market value over time).

Specific indicators of value can satisfy a potential buyer of a business or an investor, depending on the expected size of investments in the business and what are the prospects for their payback. In many cases, investments can be of credit origin. The magnitude of the possible profit should not just be different from zero, but also ensure the payment of interest to the bank. Additional benchmarks in making decisions by the investor, not counting the indicators that reflect the market and investment value of the business, can be:

- the alleged stability of the business (the ability to generate revenue for a long time);

- correlation of payback periods with competitive businesses (perhaps it is more profitable for the investor to invest in another firm, and the buyer - to purchase it);

- the level of trust between partners.

These criteria can be very subjective. Therefore, in business practice, the market and investment value of a business are parameters, although important, but not always among the key ones.

Another possible factor is the cost of the types of work associated with assessing the business for investment or a possible purchase. If an enterprise survey can be accompanied by significant investments that do not involve real profits (for example, access to external experts, auditors and analysts), then it is likely that the investor or potential business purchaser will prefer not to deal with a specific firm.

Property valuation

It will be useful to study what types of real estate values are, and also what approaches are being implemented in assessing it. But before - like in the case of business - we will define the goals that are pursued by participants of civil-law transactions of the corresponding type. The need to examine the types of real estate value, as well as to contact the services of an appraiser, arise in the following main cases:

- there is a transaction of purchase and sale of an apartment, office, other structure or premises;

- the firm's assets are valued;

- the size of the taxable base is determined in terms of property charges.

Of course, in practice, there are more reasons for real estate valuation. For example, in some cases it becomes necessary to determine the types of estimated costs in addition to the main procedures. Or - as an option - to evaluate the property in order to transfer it for public needs.

Valuation of real estate

Above we noted that the main types of enterprise value are market and investment. With respect to real estate, the same parameters can be investigated, but, as a rule, in addition there are a number of others. Namely - cadastral and insured value of the object. In a number of cases, the liquidation is also determined. The features of determining the market and investment value we have already considered above. In the case of real estate, the general principles and methodologies in their form are generally similar to those used for business valuation. Only they are used when they are more adapted to the specifics of the corresponding market: "competition" is replaced by "state" (repair level, materials of finish and its quality, etc.), "profitability" - the expected "appreciation".

Let's study now how the calculation of figures for cadastral, insurance and liquidation values is carried out. They all have some specifics. Each kind of determined value of the listed is characterized by features in the aspect of the valuation methods. Consider them.

If we are talking about the cadastral value of real estate, the appraiser takes as a basis the methods reflected in the relevant legislative sources, the recommendations of the Ministry of Finance and other agencies responsible for the practical use of the relevant information on housing. In some cases, the criteria that are characteristic for determining the market value of an object may also be involved. Various technical documentation can be studied .

If the task is to determine the insurance value of real estate, in this case, as a rule, the appraiser is guided primarily by market methods, but with an amendment to the actual content of the purchase and sale transaction. For example, if a person buys an apartment on a mortgage, only the loan amount can be included in the insurance value. And in this case, the corresponding basis for calculating the amount under the contract with the insurers may be lower than if the market value of the apartment was taken as a basis for the basis.

Mortgage is an example of a market segment where the liquidation value of an object can be practically significant for subjects of civil law transactions. In the event that, for example, individuals or organizations fail to meet credit payment conditions, the bank is likely to decide on the sale of property pledged. Even before the signing of the loan transaction, the financial institution is likely to wish to analyze the prospects for the liquidation component of the project.

Note, however, that some experts consider it improper to use the term "liquidation value" in relation to real estate transactions when interacting with banks. The fact is that by default the mortgage agreement does not imply a mandatory transfer of the apartment to the bank's ownership - it is only an interim measure for the loan. While in its pure form, the liquidation value implies the calculation of the price at which the owner of the object (for example, business) can sell his property (say, because of the bankruptcy of the enterprise). Therefore, use the term in question, with respect to real estate, should be carefully.

Value - the value is constant?

Many modern economists believe that no. If, of course, we talk about a market economy, where there is a place for a mechanism for the free formation of prices, based on supply and demand. Regardless of what types of commodity values are being researched, each of them is a non-constant value, an approximate reference point that can be used by parties to a transaction at a particular moment in time. There are, of course, industries where the volatility of the relevant indicators is minimal - for example, market segments where state orders are dominant. But this is, rather, an exception. The ability to navigate in a volatile environment of values is one of the most important competitive advantages of any modern business.