The word appraisal is a broad term which, in the financial context refers to a variety of values differentiated according to their usage and computation approached.

The commonly used are as follows:

• Market Value is defined as the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing, wherein the parties had each acted knowledgeably, prudently, and without compulsion.

• Market Value In Orderly Liquidation is defined as the amount that might be realized from assembled or piecemeal disposition of the assets in the secondhand market, assuming a reasonable period of time in which to complete the transaction.  The liquidation value estimates consider that the assets will be offered for sale in its present location and condition on an "as is, where is" basis, with the potential buyer to assume cost, if any, to dismantle and remove.

• Market Value In Forced Liquidation is defined as the amount that might be realized from assembled or piecemeal disposition of the property in the secondhand market, assuming a short period of time in which to complete the transaction.  The liquidation value estimates consider that the property will be offered for sale in its present location and condition on an "as is, where is" basis, with the potential buyer to assume cost, if any, to dismantle and remove.

• Market Value - Prompt Sale is defined as the amount at which the property might be sold in the real estate market considering a relatively short period of time in which to complete the transaction.

• Depreciated Replacement Cost is Cost of Replacement less accrued depreciation as evidenced by the observed condition in comparison with new units of like kind tempered by consideration given to extent, character and utility of the property which is to be continued in its present use as part of a going concern but without specific relations to earnings

• Replacement Cost is defined as the estimated amount of money needed to built in like kind and in new condition an asset or group of assets, taking into consideration current prices of materials, labor, contractor’s overhead, profit and fees, and all other attendant costs associated with its acquisition and installation in place, without provision for overtime or bonuses for labor, and premiums for materials.

Fair Market Value – the amount which a willing buyer and a willing seller would exchange in the current open market.

Zonal Value – the amount set by the Bureau of Internal Revenue (BIR) with the assistance of realtors and other knowledgeable persons in the area as the basis for capital gains, transfer, donor’s and creditable withholding taxes, expropriation and other transactions with the government.

Ideally, zonal values should approximate the fair market value.  However, they are not constantly updated so they are either too high (especially with current downward trend of land prices), or too low (especially if recent commercial developments occurred in the area).

Assessed Value – the amount set by the municipal or city assessor as basis for computing the annual real estate tax.  This amount is the least of the 3.

The financial statements of a company are stated in terms of a specific unit of measure, which, in our case, is the Philippine Peso.  The general purchasing power of this unit of measure, however, changes over time.  Under conventional methods of reporting, financial statements are based on historical cost despite the changes in the purchasing power of the unit of measure.

Thus, financial statements present a conglomeration of values at different levels pf purchasing power.  This has led users of financial information to question the relevance of financial statements based principally on historical cost and to advocate the recognition of the effects of inflation in the accounts.

When the company's Plant, Property and Equipment are stated in historical cost (which is much lower than the current values of these facilities), depreciation changes to operation are naturally lower and the reported net income is consequently higher.  If earnings are declared based on such reported income, the company, in effect, may be unknowingly distributing unrealistic profits to the stockholders and dissipating rather than conserving the capital of the business.

Likewise, what seem like profitable operations may actually be incurring losses by not setting the price which would give the company enough returns on the basis of higher replacement costs.

To incorporate appraised values in the balance sheet, the following requirements should be adhered to (as specified in the Financial Accounting Standards):

1. the appraisal should be made by recognized specialist independent of the company which owns the property;
2. depreciation to be charged to operations should be based on appraised values;
3. the revaluation increment should be shown under stockholders' equity under a separate caption;
4. the required disclosures should be made in the financial statements.

• Sales/purchase negotiations
• Mortgage financing
• Mergers and acquisition of companies
• Insurance (Placement/Rating/Proof of Loss)
• Estate Planning
• Litigation
• Tax Computation (Income/Estate and Gift/Ad Valorem Assessment)
• Site Selection
• Lease Negotiations
• Acquisition in Eminent Domain
• Corporate and Financial Reorganization and other management decisions

Intangible assets provide companies the needed competitive edge.  It is the reputation, technology, designs and knowledge that largely contribute to the success of the business.  They enable the business to earn above-normal income with the identifiable assets employed in the business.

Using the Income Approach to Value, the expected future economic benefits or the projected cash flows of the company for the next 5 or more years are recognized based on the company's performance and converted to the net present value.

This value represents the aggregate value of the enterprise as a whole.  The other side of the equation is composed of the tangible and intangible assets of the corporation which, together with the working capital contribute to the firm's operations.

Since the net present value of the future cashflows, the tangible assets and the net working capital of the company are easily identifiable, the intangible assets can then be derived.