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The value of any asset is usually dependent upon its ability to generate returns or how that asset performs its part as a contribution to the enterprise. The critical question is how best to determine the value? This generally requires not only extensive experience but also access to relevant information which can be used to benchmark.
Our approach towards Asset Valuations is to break down the asset into its various hypothetical components and then financially rebuild the asset to derive its value. This can be approached by analysing sales of similar assets however more often than not the value is determined by producing a discounted cash flow which also accounts for replacement and obsolescence. The technicality of this exercise is directly related to the complexity of the asset under consideration. Furthermore, it is the understanding of the principle of Estimated Useful Life which can provide a more accurate foundation for the derivation of its value.
The provision of valuations for inclusion in Financial Statements is becoming more and more critical and equally important is understanding the various accounting standards. A fundamental knowledge of the various standards and how they apply to valuations is critical as part of the reporting process. In most instances the valuations need to be produced to the satisfaction of the auditors and therefore there are questions raised by the auditors that need to be answered in order for the valuations to be incorporated in the financial statements. We have a thorough working knowledge of the standards and more specifically correctly applying those standards and how they relate to valuations.
On occasion we are instructed to value assets which are rarely valued, examples of this include significant operations where there are no comparisons which can be made to provide benchmarks. In these cases it is the Valuer’s experience that can provide the necessary methodical and logical approach that can be described and explained in order to provide a value. Sometimes the assets to be valued do not provide cash flows but they do provide benefit to the whole, it is the quantification and monetisation of these assets that need to be calculated in order to report a value.