An Analysis of Asset Valuation Methods for Five Public Companies

This report provides a comprehensive analysis of asset valuation methods employed by five prominent companies: Rio Tinto Limited, Wesfarmers Limited, Brambles Limited, Ramsay Health Care, and Woolworth Limited. The report begins with an introduction to the concept of asset valuation, emphasizing its significance in accounting and finance, and proceeds to outline various valuation methods, including net asset value, absolute value (discounted cash flow models), and relative valuation ratios. The core of the report involves examining the different types of assets held by each company, categorizing them as non-current and current assets, and providing specific examples such as goodwill, intangible assets, property, plant, and equipment, and inventories. The report then delves into the valuation methods used by each company, such as the cost method (Rio Tinto), fair value method (Wesfarmers), base stock method (Brambles), standard cost method (Ramsay Health Care), and option pricing method (Woolworth). It highlights how each company applies these methods to its specific assets, considering both tangible and intangible assets. The report concludes by discussing the importance of different valuation methods for various asset types, emphasizing the need for accurate asset valuation for informed decision-making, taxation, and investment analysis.

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Rio Tinto Limited, Wesfarmers Limited, Brambles Limited, Ramsay Health Care, and Woolworth
Limited.
Finance and Accounting
9/27/2019

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Contents
Introduction......................................................................................................................................2
Valuation method of the different assets.........................................................................................2
Different types of the assets held by the different companies.........................................................4
Types of the valuation method held by the company......................................................................7
The use of the different asset valuation method by the company....................................................8
Conclusion.......................................................................................................................................9
References......................................................................................................................................11

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Introduction
The report is prepared in regards to the five companies to analyses the conceptual
framework of the accounting. There are many types of the assets which are used in the company
and in this report the valuation of the asset will be done in regards with the five companies which
are Rio Tinto Limited, Wesfarmers Limited, Brambles Limited, Ramsay Health Care, and
Woolworth Limited. The types of the assets which these companies used will be elaborated in
this report such as tangible assets, intangible assets, fixed assets, etc. There are different types of
the valuation method which is accessed by the companies which help in determining the
economic value of the asset (Sacui and Szatmary, 2015). Valuation is important to analyses the
accurate business value of the assets in the market. By valuation the company knows how much
worth of asset they hold. In accounting and finance the valuation of the asset is very important
activity.
The campiness also does the valuation of the asset so that the value of the taxation can also be
analyzed. With the help of the book values the asset valuation is evaluated to analyses the market
value of the assets. The recent annual report of these five companies will be analyzed so that
different valuation methods used by the different companies can be ascertained. In this report the
usefulness of this valuation method will also be discussed which helps in providing the important
information (Bauer, 2014).
Valuation method of the different assets
There are several methods of the valuation of the asset which are used in the accounting
and financing so that operating and the non-operating asset can be used. The operating assets of
the company are the main source of the revenues, income and the cash flow. By using the two
different concepts the valuation of the operating asset is done with the going concern value and
the liquidation value (Damodaran, 2016). The banking investment companies and the private
equity companies use the going concern method to value the assets as liquidation method is
generally used when distressed companies are considered. When the fair market value of the
asset is determined than it is called the process of the asset valuation. Both the measurement of
the subjective and the objective is done with the asset valuation. There are basically three types
of valuation method which has described below:

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Net asset value: This value is also known as the net tangible asset value where the
tangible asset value is less than the liabilities and the intangible assets on the balance sheet of the
company. The minimum worth value of the asset is the net value asset which also provides the
useful floor. In this valuation of the asset the intangible assets are excluded (Popovic, et al.,
2015). If the market value is lower than the book value of the stock then it is undervalued which
indicates that trading stock is at the discount to the book value per share.
Absolute value: On the basis of the characteristics of the asset, the assets are valued in
the model of the Absolute value. This model is also known as the DCF model which is
discounted cash flow where the assets of the company are valued at the opportunity cost of the
capital and the future cash flows such as bonds, stocks, real estate, etc. this method includes
several things which are stated below:
Discounted dividend models: The stock price is valued at the present value by
discounting predicated dividends (Aggarwal, 2016). If the trading prices of the shares are higher
by obtaining the value of the DDM, then the stock is undervalued.
Discounted free cash flow model: In this model, the present value of the assets are
evaluated by discounting the weighted average cost of capital.
Residual income valuation model: This valuation of the asset is calculated as the net
income for the post-payment of the outside parties and the payment of the suppliers less charge
for the cost of capital.
Relative valuation ratios: The valuation of the asset is done in this method by observing
the market prices of similar assets (Russell, 2016). By comparing the assets with a similar asset
of the market the value is determined in the market. The stocks of the company are basically
valued on the price-earnings ratio and the price to cash flow ratio.
Issues recognize under the valuation of the asset: Under the valuation of the asset,
there are many issues which has risen such as the problem of impairment of the asset. When the
assets are badly damage or the market value of the asset has been reduced then it creates the
problem. There are some negative issues also which creates problems in the company such as the
legal issues which have a great impact on the valuation of the assets. The total assets of the

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balance sheet get reduced by the disposal of the assets before the end of the useful life so this
creates the issue in the company (Rojo-Ramírez, 2014).
Different types of assets held by the different companies
Rio Tinto Limited
Non-Current assets 2018
Goodwill 912
Intangible assets 2,779
Property, plant, and equipment 56,361
Investments in equity accounted units 4,299
Inventories 152
Deferred tax assets 3,137
Trade and other receivables 1,585
Tax recoverable 8
Other financial assets (including loans to equity accounted
units) 814
Current asset 2018
Inventories 3,447
Trade and other receivables 3,179
Tax recoverable 77
Other financial assets (including loans to equity accounted
units) 2,692
Cash and cash equivalents 10,773
Wesfarmers Limited
Non-Current assets 2018
Investments in associates and joint venture 748
Deferred tax assets 692

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Property 1,920
Plant and equipment 6,488
Goodwill 13,491
Intangible assets 4,369
Derivatives 391
Other 128
Current asset 2018
Cash and cash equivalents 683
Receivables - Trade and other 1,657
Inventories 6,011
Derivatives 126
Other 229
Brambles Limited (Brambles Limited,
2018).
Non-Current assets 2018
Other receivables 50.4
Property, plant, and equipment
5,139.7
0
Goodwill and intangible assets
1,022.8
0
Deferred tax assets 38.2
Other assets 18.1
Current asset 2018
Cash and cash equivalents 180.2
Trade and other receivables
1,257.9
0
Inventories 60.3

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Other assets 70.9
Ramsay Health Care
Non-Current assets 2018
Other Financial assets 41528
Investment in joint ventures 241,446.00
Property, plant, and equipment
4,113,162.0
0
Intangible assets 2264500
Deferred tax assets 199528
Prepayments 11566
Derivative financial
instruments 244
Receivables 68689
Current asset 2018
Cash and Cash Equivalents 770566
Trade and other Receivables
1,151,653.0
0
Inventories 276112
Derivative Financial
instruments 87
Income tax receivables 15512
Prepayments 113294
Other Current Assets 18300
Woolworth Limited
Non-Current assets 2018
Trade and other receivables 93

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Other financial assets 522
Property, plant, and equipment 9,026
Intangible assets 6,465
Deferred tax assets 271
Current asset 2018
Cash and cash equivalents 1,273
Trade and other receivables 801
Inventories 4,233
Other financial assets 53
Types of the valuation method held by the company
Rio Tinto Limited: This Company does value the assets by differentiating the tangible
asset and intangible asset. The tangible asset of the company is the one which can be seen and
has the physical appearance such as land machinery, building, cash of the company, etc. The
tangible assets of the company are valued by deducting the intangible assets of the company
from the total assets (Rio Tinto Limited, 2018). The intangible assets of the company are the one
which has no physical appearance but have some value in the company such as patents, logo,
trademarks, etc. The company Rio Tinto uses the cost method for the valuation of the asset. The
cost method is the simple method for evaluating the value of the assets as it was done for the
price for which the asset has brought.
Wesfarmers Limited: Valuation of the assets in the company Wesfarmers are done by
calculating the fair value of the asset using the quoted prices. By using the inputs other than the
quoted price the fair value is estimated in the company for the assets. The fair value in the
company is evaluated on a recurring basis (Wesfarmers Limited, 2018). For the valuation of the
asset the company Wesfarmers uses the market value method in which the assets are valued on
the basis of the projected price and the market price when the assets are sold in the open market.
Sometimes the company also uses the net realization method and the replacement method when
the similar assets in the open market are absent.

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Brambles Limited: The Company Brambles limited uses base stock method for the
valuation of the assets in the company. The company has to keep a certain level of the stock in
the company so that the value of the assets can be ascertained. This company also uses the fair
value method for ascertaining the value of the assets as it estimates the potential market price of
the asset accurately (Bauer, 2014). In this method of the valuation the objectivity factors are
also included in the valuation such as distribution cost, production cost, replacement cost, etc.
Ramsay Health Care: This Company uses the Standard cost method for valuing the
asset in which the company fixes the standard cost through past experiences (Ramsay Health
Care, 2018). The valuation of the asset is done through the predetermined cost and it is presented
in the balance sheet. The company also values the asset through the model of the absolute value
in which the present value of the asset in the company is determined through the expected future
cash flows. This model is also known as the DCF model which is discounted cash flow where the
assets of the company are valued at the opportunity cost of the capital and the future cash flows
such as bonds, stocks, real estate, etc.
Woolworth Limited: The Company Woolworth uses the option pricing method for the
valuation of the assets in the company (Woolworth Limited, 2018). In this method, the assets are
valued at the complex present value method such as employee stock options, put option, call
option, etc. The company always examines its assets with the other competitors so that the
position of the company can be improved in the future. The company also uses the net realizable
value to determine the assets of the company in which the price for which the assets are sold in
the market are considered.
The use of the different asset valuation method by the company
Every company uses the different valuation method for the different assets as total assets
include everything tangible assets, non-tangible assets, fixed assets, and the other assets which
cannot be valued through the sane method (Bauer, 2014). So every company uses a different
method for evaluating the different types of assets. If the company wants to determine the
present value of the assets then they use the absolute value model but if the company wants to
analyses the market price of the asset then they use the model of the relative value. For the

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valuation of the asset some evidence is required in the company. For determining the fair market
value the formulas are derived from the comparable business sales so every business has
different transactions of the sales.
A different method of the valuation of the assets has different importance in the company
as they provide certain benefits such as:
It helps in ensuring the company whether the right price is paid in the company or not.
When any investment is made by the company then it becomes very important to analyses that
right amount is spent on that asset or not.
The primary reason for the valuation of the assets is taxation as it helps in analyzing the
accurate calculation (Penman, 2009). Valuation of eth property has to be done in the company
such as property building, machines to evaluate the value of the real estate.
The future earning potential of the asset is also analyzed through the valuation of the
assets. If the investment is made for the creation of the asset then the imperative value has been
undertaken so that the potential of the investment can be analyzed (Fragouli, 2015).
The valuation of the tangible and the intangible assets in the company are very important
as it helps in analyzing the capital budgeting and the planning of the investment in the business.
Asset valuation is inevitable which also helps in merger and acquisition and helps in taking the
useful information of the company.
The use of the different methods is acceptable by the auditor of the company to maintain
transparency in the financial audit and report. As the process of the audit, valuation of the assets
is verified by them (Yallwe and Buscemi, 2014).
Asset valuation is also needed in the company for the loan application as collateral is
required for the protection in the bank against the debt default.
Conclusion
From the above report, it is concluded that asset valuation is very important in the
company as it helps in analyzing the true value of the company at the present time in the market.
In this report the annual report of the five companies is studied thoroughly so that the assets in

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different companies can be analyzed and their valuation of the asset can be ascertained. On the
basis of the characteristics of the asset, the assets are valued in the model of the Absolute value
which has explained in this report. In the relative valuation the asset is done through this method
by observing the market prices of similar assets. By comparing the assets with a similar asset of
the market the value is determined in the market. in the net asset value method, if the market
value is lower than the book value of the stock then it is undervalued which indicates that trading
stock is at the discount to the book value per share.
Every company uses the different valuation method for the different asset such as the
company Rio Tinto uses the cost method for the valuation of the asset which is a very simple
method. Ramsay Health Care Company uses the Standard cost method for valuing the asset in
which the company fixes the standard cost through past experiences. The Company Woolworth
uses the option pricing method for the valuation of the assets in the company. The Company
Brambles limited uses base stock method for the valuation of the assets in the company.
Valuation of the assets in the company Wesfarmers is done by calculating the fair value of the
asset using the quoted prices.

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