Valuing a business is not just a necessity, it’s also a legal obligation that directors would be ill-advised to ignore. Adam Bernstein explains
Every business has assets. From land and buildings to equipment, vehicles, goodwill, brands and intellectual property, there is value in everything. But the question for the man on Clapham Omnibus is how to understand the true value of those assets?
Legal principles
John Fawcett, CEO at Close Brothers Asset Finance (Transport Division), outlines what the Companies Act 2006 demands. He says that a business’ accounts must show a fair and reasonable value of the cost of an asset at the outset and also throughout its life. But showing this isn’t simple: “Assets are used in different ways. A bus, for example, which is run lightly will be worth more over time than a unit run 24/7 and accounting principles allow for a business to reflect this in their accounts.”
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