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Allocation of business assets into tangible and intangible components: A new lexicon. (Features).


Allocation of total appraised value An appraised value (USA) or mortgage valuation (Australia) pertains to the assessed value of real property in the opinion of a qualified appraiser or valuer. It is usually used as a pre-qualification & risk-based pricing factor related to the issuance of mortgage loans by a  for certain operating properties between tangible and intangible components, if not required by investors, is mandated by USPAP USPAP Uniform Standards of Professional Appraisal Practice  and required for taxation, underwriting, and condemnation. Not well covered in the appraisal literature, the dialogue has been complicated by contradictions among the meanings of terms used by the various appraisal subgroups. Because the terms business enterprise, business enterprise value, going concern, going concern value, and goodwill are so confounded, new terms See suggestions for new terms.  were coined coincident with developing the Appraisal Institute's Course 800. This article defines these new terms and introduces a methodology for allocating tangible and intangible asset Intangible Asset

An asset that is not physical in nature.

Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets.

Allocating the assets of operating properties into tangible and intangible components is a timely topic for discussion and examination due to the frequency with which this topic is now being confronted in journal articles, case law, appraisal standards, and state statutes. Examples of the currency of this issue include:

* Senate Bill 5286, amending the Revised Code of Washington (RCW RCW Revised Code of Washington (state law)
RCW Runtime Callable Wrapper (Microsoft .NET)
RCW Red-Cockaded Woodpecker (Picoides Borealis)
RCW Real Color Wheel
) to exempt intangible property intangible property n. items such as stock in a company which represent value but are not actual, tangible objects.  from ad valorem According to value.

The term ad valorem is derived from the Latin ad valentiam, meaning "to the value." It is commonly applied to a tax imposed on the value of property.
 taxation, enacted on July 27, 1997. (1)

* California Revenue and Tax Code, [degrees][+ or -]110, specifically exempting intangible property from ad valorem taxation by stating in part, "[t]he value of intangible assets and rights to the going concern value of a business using taxable property shall not enhance or be reflected in the value of the taxable property."

* California Code of Civil Procedure, [section]1263.510, requiring that an "owner of a business conducted on the property taken, or on the remainder if such property is part of a larger parcel, shall be compensated for loss of goodwill if the owner proves...." (2)

* Courts awarding compensation for the "going concern value" of a business located on property condemned through the exercise of eminent domain eminent domain, the right of a government to force the owner of private property sell it if it is needed for a public use. The right is based on the doctrine that a sovereign state has dominion over all lands and buildings within its borders, which has its origins in . (3)

* Differences in depreciable depreciable

Of, relating to, or being a long-term tangible asset that is subject to depreciation.
 lives for tangible and intangible business assets (4) requiring separate value estimates for numerous property classes and categories.

* USPAP SR 1-2(e) and 1-4(g) requiring appraisers to "identify and consider the effect on value of any personal property, trade fixtures, or intangible items that are not real property but are included in the appraisal."

* Numerous journal articles published over the past decade debating "business enterprise value" issues for operating properties and retail malls in particular. (5)

Because most viable operating enterprises trade as going concerns and inasmuch as in·as·much as  
1. Because of the fact that; since.

2. To the extent that; insofar as.

inasmuch as

1. since; because

 most investors are not interested in allocating the value among the components, issues of the existence and magnitude of the non-real estate components and how they are to be allocated pose problems to anyone analyzing such transactions. This dilemma notwithstanding, for reasons such as proper assessment valuations, condemnation and lending requirements, and tax issues, allocations must be made. Unfortunately, there has been little definitive direction in the appraisal body of knowledge as to composition of the intangibles or how the allocation of the components of the operating enterprise could be performed.

To a great extent, dialogue concerning these issues has been hampered by a lack of a common language among various disciplines such as accounting, business, and property valuation. In particular, participants in the ongoing debate have adopted differing terminologies and assigned disparate meanings to terms commonly used in a variety of contexts. What is meant by going concern, going concern value, going value, business enterprise, business value, business enterprise value, or goodwill depends on the root discipline of the user of the term, the authoritative source consulted, and/or the legal citation Legal citation is the style of crediting and referencing other documents or sources of authority in legal writing.

In addition to the basic rules of footnoting and quotation that closely follows regular citation rules, there are several broad classes of law citation:
 referenced. As the following will show, there is no consensus concerning which term to apply to a given situation nor the appropriate definition to assign to a given term.

Welcome to Babylon

Business Enterprise Value

A limited search of the literature reveals at least five different definitions of business enterprise and/or business enterprise value. Examples of varying perceptions of what these terms mean include:

* The Appraisal of Real Estate (6) refers to business enterprise value (BEV) as:

a value enhancement that results from items of intangible personal property such as marketing and management skill, an assembled work force working capital, trade names, franchises, parents, trademarks, non-realty related contracts or leases, and some operating agreements.

* The Dictionary of Real Estate Appraisal Real estate appraisal

An estimate of the value of property using various methods.
 (7) provides the following definition of "business value":

a value enhancement that results from items of intangible personal property such as marketing and management skill, an assembled work force, working capital, trade names, franchises, patents, trademarks, contracts, leases, and operating agreements.

* The IAAO IAAO International Association of Assessing Officers  Glossary for Property Appraisal and Assessment (8) defines BEV as:

a term applied to the concept of an intangible, nonrealty component of a property's value probably ascribable as·cribe  
tr.v. as·cribed, as·crib·ing, as·cribes
1. To attribute to a specified cause, source, or origin: "Other people ascribe his exclusion from the canon to an unsubtle form of racism" 
 to supramarginal management competence. Different from goodwill and going concern value.

* In Journal of Property Tax Management, Fisher d Kinnard (9) describe BEV as:

an intangible asset.... the measurable and transferable present worth of the business organization, management, assembled workforce, skills, working capital, and legal rights (trade names, business names, franchises, patents, trademarks. contracts, leases, and operating agreements) that have been assembled to make the business a viable and valuable entity in its competitive market.

* International Valuation Standards 2000 (10) doesn't define BEV, per se. A definition of business enterprise, however, is offered: [a] commercial, industrial, service or investment entity pursuing an economic activity; generally a profit-making enterprise.

These five perspectives on business enterprise and business enterprise value differ in substantive ways. First, none specifically includes the value of entrepreneurship in the traditional sense of excess, economic, or entrepreneurial profit (a topic discussed in more detail later), although the International Valuation Standards may be construed to include this under the rubric RUBRIC, civil law. The title or inscription of any law or statute, because the copyists formerly drew and painted the title of laws and statutes rubro colore, in red letters. Ayl. Pand. B. 1, t. 8; Diet. do Juris. h.t.  of "generally a profit-making enterprise." It is unclear, however, whether the definition is referring to accounting profit or economic profit, (11) which is fundamental in determining the extent to which revenue should actually accrue to the entrepreneur. Second, the IAAO definition fails to recognize that supramarginal management expertise must be paid a supranormal management fee. In a competitive market for management, the supranormal management fee would be sufficient to exhaust any revenue derived from the activities of a supranormal manager, leaving no revenue to ascribe as·cribe  
tr.v. as·cribed, as·crib·ing, as·cribes
1. To attribute to a specified cause, source, or origin: "Other people ascribe his exclusion from the canon to an unsubtle form of racism" 
 to BEV. Third, the Dictionary of Real Estate Appraisal defi nition seems to include the value of all forms of leases. However, real property lease revenue has always been ascribed to the value of the realty, not the intangibles.

Going Concern

In addition to uncertainty regarding the definitions of "business enterprise" and "business enterprise value," confusion exists concerning the degree to which these terms are synonymous with synonymous with
adjective equivalent to, the same as, identical to, similar to, identified with, equal to, tantamount to, interchangeable with, one and the same as
 "going concern" and "going concern value." Desmond and Kelley, writing from a business valuation perspective, hold that "going concern [value] is an intangible that attaches to the tangible assets of some businesses." (12) This position is echoed in Northern Natural Gas Company, et al. v. United States of America UNITED STATES OF AMERICA. The name of this country. The United States, now thirty-one in number, are Alabama, Arkansas, Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, New Hampshire,  (13) and appears in Real Estate Appraisal Terminology (14):

It (going concern value) is an excess of value over cost, which arises as a consequence of a complete and well-assembled operation production mechanism; it is the value of an efficient layout and operational control system resulting in the most desirable synchronization of the merchandising, production, or distribution activities of the enterprise.

Conversely, other authoritative sources hold that going concern includes all of the assets of a business, tangible or intangible, with the proviso that the value of the business in continuing operation exceeds the liquidation value Liquidation value

Net amount that could be realized by selling the assets of a firm after paying the debt.
 of the business assets, less liquidation costs. As an example of mainstream thinking in financial accounting, Ingram and Baldwin (15) hold that a going concern is:

an organization with an indefinite life that is sufficiently long that, over time, all currently incomplete transformations [transforming resources from one form to a different, more valuable, form] will be completed.

The unencumbered value of the organization (corporation, partnership, or sole proprietorship A form of business in which one person owns all the assets of the business, in contrast to a partnership or a corporation.

A person who does business for himself is engaged in the operation of a sole proprietorship.
) would presumably pre·sum·a·ble  
That can be presumed or taken for granted; reasonable as a supposition: presumable causes of the disaster.
 include the value of all of the organization's assets, which would likely include tangible and intangible property.


As with business enterprise, there are also many differing viewpoints concerning what goodwill is and how it is defined. Five examples follow:

* The Business Valuation Handbook (16):

those elements of a business or person which cause customers to return to that business or person and which usually enable a firm to generate profit in excess of that which is required for a reasonable return on all of the other assets other assets

Assets of relatively small value. For financial reporting purposes, firms frequently combine small assets into a single category rather than listing each item separately.
 of the business.

* Financial Accounting, (17) a financial accounting textbook:

the value of all favorable attributes that relate to a business enterprise. These include exceptional management, desirable location, good customer relations, skilled employees, high-quality products, fair pricing policies, and harmonious relations with labor unions.

* Ingram and Baldwin provide a different financial accounting-based definition:

the excess of the purchase price of a company over the fair market value of its net assets Net assets

The difference between total assets on the one hand and current liabilities and noncapitalized long-term liabilities on the other hand.

net assets

See owners' equity.
 (assets-liabilities) ... value that is nor recognized on the balance sheet.

* The American Society of Appraisers:

an intangible asset that arises as a result of name, reputation, customer patronage, location, products, and similar factors that have not been separately identified and/or valued but that generate economic benefits. (18)

* International Valuation Standards 2000:

an intangible but marketable asset based on the probability that customers will continue to resort to the same premises where the business is carried on under a particular name, or where goods are sold or services provided under a trade name, with the result that there is likely to be continuing prospect of earning an acceptable profit.

arises as a result of name, reputation, customer patronage, location, products and similar factors that have nor been separately identified and/or valued but which generate economic benefits.

Critical examination uncovers several problems with these definitions. First, one of the financial accounting definitions includes assets common to some of the definitions of business enterprise such as exceptional management, an assembled work force, and business name. Second, the Desmond and Kelley definition refers to "those elements of a business, which cause customers to return." Couldn't such elements be tangible? If so, are they goodwill? Third, several of the definitions include "location." Location seems to imply that goodwill is an attribute of real property, since location is meaningless in any sense other than spatial. Is goodwill an element of realty? Finally, what is meant by an "acceptable profit" or "profit in excess of what is required for a reasonable return on all of the other assets of the business"? Are the definitions referring to accounting profit or economic profit? Is a "reasonable return" to be interpreted in an opportunity cost context? The definitions are imprecise and unclear.

A New Lexicon

Language is the means by which we communicate what we are doing and precisely what is being valued. Because the terms business enterprise, business enterprise value, going concern, going concern value, and goodwill are so confounded, new terms were coined coincident with developing an Appraisal Institute The Appraisal Institute (Institute), headquartered in Chicago, Illinois, is an international association of professional real estate appraisers.[1] It was founded in January 1991 when the American Institute of Real Estate Appraisers (AIREA) and the  course dealing with tangible and intangible business assets. The new course, Separating Real and Personal Property from Intangible Business Assets (Course 800), covers the theory of the firm, entrepreneurship, an introduction to business valuation, measuring intangible asset capitalization rates, and provides procedural examples--all of which rely on the new lexicon. It introduces methodology for estimating the value of the total assets of the business (TAB); and, using a case study of a full-service hotel, illustrates how the tangible and intangible components of value can be allocated. The real property residual model illustrated in the course hotel example is summarized as follows:

+ Value of total assets of the business

- Furnishings, fixtures, and equipment value

- Cash and equivalents value

- Skilled workforce value

- Name/reputation/affiliation value

- Residual intangible assets value

= Real property value as a residual

Figure 1 shows some of the bases for development and discussion of the new terminology. It breaks down the asset side of a firm's balance sheet into underlying tangible and intangible property components. By ignoring the liability side of the balance sheet, it looks at a firm or business as if it has no accounts payable, no other short-term or long-term debt Long-Term Debt

Loans and financial obligations lasting over one year.

For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt.
, and concentrates solely on business assets.

The following discussion begins by precisely defining the going concern, the entity owning all of the business assets. The new definition comes from a financial accounting perspective, enabling clearer dialogue with financial market professionals.


Going Concern

A going concern is an established and operating business having an indefinite future life.

A going concern is a business that can own tangible and intangible assets. The definition's phrase "indefinite future life" distinguishes going concerns from businesses that have no future, requiring valuation under an alternative liquidation premise rather than the going concern premise applicable to businesses having an indefinite future life. The term "going concern value" should be abandoned for two reasons. First, there is little agreement as to the term's meaning; second it is a sloppy construct. More often than not, when we say "going concern value" what we really mean to say is "market value of the going concern," but the imprecise going concern value phrase could just as easily be interpreted as "investment value of the going concern" or "insurable value of the going concern." In order to precisely identify what is being valued, Course 800 introduced the term "market value of the total assets of the business." This term is consistent with valuing all of the assets shown in Figure 1, and it is clearly different from "business value," used by business valuers when estimating business value net of short-term liabilities.

Market Value of the Total Assets of the Business (MVTAB)

Market value of the total assets of the business is the market value of all of the tangible and intangible assets of a business as if sold in aggregate as a going concern. (19)

As Figure 1 shows, total business (going concern) assets are divided into two primary categories- tangible property tangible property n. physical articles (things) as distinguished from "incorporeal" assets such as rights, patents, copyrights, and franchises. Commonly tangible property is called "personalty.  and intangible property. Tangible property consists of items that can be seen, touched, and felt. Tangible business assets are further divided into real property and personal property, such as inventory, furnishings, fixtures, and equipment. No new terminology is needed to precisely describe the tangible business assets.

Intangible property includes numerous ethereal ethereal /ethe·re·al/ (e-ther´e-il)
1. pertaining to, prepared with, containing, or resembling ether.

2. evanescent; delicate.

 assets such as cash, (20) a workforce, contracts, business name, patents, copyrights, and potentially numerous other assets. Three new terms are being adopted to enable better appraisal-client communication: total intangible assets, identified intangible assets, and residual intangible assets.

Total Intangible Assets (TIA (1) (Telecommunications Industry Association, Arlington, VA, A membership organization founded in 1988 that sets telecommunications standards worldwide. It was originally an EIA working group that was spun off and merged with the U.S. )

Total intangible assets are all of the intangible assets owned by a business (going concern), which can be further divided into two categories for valuation purposes: identified intangible assets and residual intangible assets.

Identified Intangible Assets (IIA (1) (Information Industry Association, Washington, DC) In 1999, IIA merged with SPA (Software Publishers Association) to become the Software & Information Industry Association. See SIIA. )

Identified intangible assets are those intangible assets of a business (going concern) that have been separately identified and valued in an appraisal.

Residual Intangible Assets (RIA (Rich Internet Application) A Web-based application that approaches the speed and elegance of a local application. An RIA may refer to a browser-based application that uses AJAX or another enhanced coding technique. )

Residual intangible assets are those intangible assets of a business (going concern) that have not been separately identified and valued in an appraisal. The value of residual intangible assets equals the value of total intangible assets minus the value of identified intangible assets.

Figure 1 includes an item labeled CEP CEP congenital erythropoietic porphyria.

congenital erythropoietic porphyria
 (an acronym for capitalized economic profit) as one possible intangible business asset. CEP is based on economic theory dating from Richard Cantillon Richard Cantillon (1680-1734), acknowledged by many historians as the first great economic "theorist", is an obscure character. This much is known: he was an Irishman with a Spanish name who lived in France.  (1680-1734) and contributed to over time by highly regarded scholars such as Joseph Schumpeter Noun 1. Joseph Schumpeter - United States economist (born in Czechoslovakia) (1883-1950)
Joseph Alois Schumpeter, Schumpeter
 (The Theory of Economic Development, 1912) and Frank Knight Frank Hyneman Knight (November 7, 1885 - April 15, 1972) was an important economist of the twentieth century. He was born in McLean County, Illinois in a devoutly Christian family of farmers.  (Risk, Uncertainty and Profit, 1921). (21) Briefly, economic profit is what remains after all productive agents (land, labor, and capital) have been paid the full opportunity cost of their contribution to the firm's production process. Economic profit differs dramatically from accounting profit because opportunity cost is not considered in the computation of accounting profit. Economic profit can be, and usually is, fleeting due to the effects of competition. Thus, it is capitalized at a very high rate indicative of the uncertainty associated with its future continuation. Because economic profit is often temporary in nature, any value attributable to it is apt to exist for a finite period until it is fully eroded by market competition. Nevertheless, economic profits do occur, and expectations of continuing future economic profits are valuable intangible assets. Since economic profits are nearly impossible to isolate and value separately, CEP is included in the figure as an element of residual intangible assets for valuation purposes. The new definition for CEP follows.

Capitalized Economic Profit (CEP)

Capitalized economic profit is the present worth of an entrepreneur's economic (pure) profit expectation from being engaged in the activity of acquiring an asset, or collection of assets, at a known price and then selling, or being able to sell, the same asset or collection of assets at a future uncertain price. The amount of the entrepreneur's expected economic profit, and consequent CEP, is determined by the nature of the risks taken and/or the expected return Expected Return

The average of a probability distribution of possible returns, calculated by using the following formula:
 to the entrepreneur's innovation. CEP is the value of a residual claim Residual claim

Related: Equity claim
, which is subordinate to the opportunity cost daims of all agents of production employed by the business (e.g., land, labor, and/or capital).


Course 800 introduces five new terms and six new definitions to the valuation lexicon, dispensing with vague and confusing terminology including going concern value, business enterprise, business enterprise value, and goodwill (which remains a valid, yet ill-defined, term in a financial accounting sense). Going concern is precisely defined, making it clear that the going concern is the business, which may own both tangible and intangible assets.

The five new terms introduced are market value of the total assets of the business, total intangible assets, identified intangible assets, residual intangible assets, and capitalized economic profit. This new lexicon will enable appraisers to precisely describe what is being included in the various asset categories when separating real and personal tangible business asset values and intangible business asset values. This will go a long way toward clearing up confusion resulting from the current multitude of meanings for commonly used and commonly misinterpreted business asset valuation terminology. The new definitions provide a linguistic foundation, applying the theory of the firm to the real world problem of separating the values of tangible and intangible business assets in a logical and systematic way.

Marvin L. Wolverton, PhD, MAI MAI Mail (File Name Extension)
MAI Multilateral Agreement on Investment
MAI Maius (Latin: May)
MAI Ministerul Administratiei si Internelor (Romanian) 
, has been appraising real property since 1976. He is currently a visiting associate professor at the Department of Finance, University of Nevada-Las Vegas. He previously held the position of Alvin J. Wolff Distinguished Professor of Real Estate at Washington State University Washington State University, at Pullman; land-grant and state supported; chartered 1890, opened 1892 as an agriculture college. From 1905 to 1959 it was the State College of Washington. . He holds a PhD in Business Administration from Georgia State University History
Georgia State University was founded in 1913 as the Georgia School of Technology's "School of Commerce." The school focused on what was called "the new science of business.
 in Atlanta Georgia and a MS in economics from Arizona State University Arizona State University, at Tempe; coeducational; opened 1886 as a normal school, became 1925 Tempe State Teachers College, renamed 1945 Arizona State College at Tempe. Its present name was adopted in 1958. . His bachelor's degree is from New Mexico New Mexico, state in the SW United States. At its northwestern corner are the so-called Four Corners, where Colorado, New Mexico, Arizona, and Utah meet at right angles; New Mexico is also bordered by Oklahoma (NE), Texas (E, S), and Mexico (S).  Tech, Socorro, New Mexico Socorro is a city in Socorro County in the U.S. state of New Mexico. It stands in the Rio Grande Valley, at an elevation of 4579 feet (1396 m). The population was 8,879 at the 2000 census. It is the county seat of Socorro CountyGR6. , in mining engineering.

David C. Lennhoff, MAI, SREA SREA Saskatchewan Real Estate Association (Canada)
SREA Supplier Request for Engineering Approval
SREA Structural Roof Erectors Association (Portland, OR)
SREA Smith Rea Energy Associates Ltd
, CRE CRE Commercial Real Estate
CRE Corporate Real Estate
CRE Commission for Racial Equality (Scotland)
CRE CCD (Charge Coupled Device) and Readout Electronics
CRE Camp Response Element
, has been appraising real estate in the Washington, DC, metropolitan area since 1973. He is currently president of the Appraisal Division of Delta Associates, a Transwestern Company. He specializes in litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute.

When a person begins a civil lawsuit, the person enters into a process called litigation.

James D. Vernor, PhD, MAI, is the Chairman Emeritus and Associate Professor Emeritus of Real Estate at Georgia State University. Mr. Vernor received his PhD at the University of Wisconsin-Madison “University of Wisconsin” redirects here. For other uses, see University of Wisconsin (disambiguation).
A public, land-grant institution, UW-Madison offers a wide spectrum of liberal arts studies, professional programs, and student activities.
 in real estate and urban land economics. He has published article is numerous publications such as The Appraisal Journal, Assessment Journal, Valuation Insights & Perspectives, The Journal of Property Tax Management, Economic Development Review, The Quarterly Byte, Real Estate Review, Appraisal Review Journal, Real Estate Issues, and Real Estate Appraiser/Analyst.

Richard Marchitelli, MAI, CRE, is a director in the real estate valuation/consulting practice of PricewaterhouseCoopers LLP LLP - Lower Layer Protocol , where he counsels private and public sector clients on use, capital deployment, valuation, dispute resolution, litigation support, and strategic asset management issues. He is a former Editor-in-Chief of The Appraisal Journal (1989-1994) and is a past contributor. He has chaired various Appraisal Institute committees and has been a recipient of several awards of that organization including the Lum n. 1. A chimney.
2. A ventilating chimney over the shaft of a mine.
3. A woody valley; also, a deep pool.
 Award (1998), the Wagner Award (1995), and the George L. Schmutz Memorial Award (1984).

(1.) See RCW 84.36.070, Intangible Personal Property-Appraisal, for a detailed list of assets considered to be intangible and exempt under this newly enacted legislation.

(2.) The owner must satisfy four requirements (requisite proofs) in order to be eligible for compensation for goodwill. Interested readers are referred to the code for additional detail. The code defines goodwill as "the benefits that accrue to a business as a result of its location, reputation for dependability, skill or quality, and any other circumstances resulting in probable retention of old or acquisition of new patronage." For further clarification and interpretation of this statute, see People v. George H. Muller, et al, 36 Cal.3d 263 and P. M. Millar, "Understanding Goodwill Appraisals," Right of Way (May/June 2000): 14.

(3.) See City of Detroit v. Michael's Prescriptions, N.W.2d, 1985 Mich. App LEXIS 2772, July 1, 1985; which relied on Grand Rapids and Indiana Railroad The Grand Rapids and Indiana Railroad Company at its height provided passenger and freight railroad services between Cincinnati, Ohio and the Straits of Mackinac. The company was formed on January 18, 1854 and was dissolved into the Pennsylvania Railroad Company in 1918.  Company v. Weiden, 38 NW 394 (1888).

(4.) See IRS An abbreviation for the Internal Revenue Service, a federal agency charged with the responsibility of administering and enforcing internal revenue laws.  publication 946, How to Depreciate depreciate v. in accounting, to reduce the value of an asset each year theoretically on the basis that the assets (such as equipment, vehicles or structures) will eventually become obsolete, worn out and of little value. (See: depreciation)  Property.

(5.) See David C. Lennhoff, ed., A Business Enterprise Value Anthology (Chicago: Appraisal Institute, 2001).

(6.) Appraisal Institute, The Appraisal of Real Estate, 11th ed. (Chicago: Appraisal Institute, 1996), updated in the 12th edition.

(7.) Appraisal Institute, The Dictionary of Real Estate Appraisal, 3rd ed. (Chicago: Appraisal Institute, 1993).

(8.) International Association of Assessing Officers, Glossary for Property Appraisal and Assessment (Chicago: International Association of Assessing Officers, 1997).

(9.) Jeffery D. Fisher and William N. Kinnard, "The Business Enterprise Value Component of Operating Properties," in A Business Enterprise Value Anthology, David C. Lennhoff, ed. (Chicago: Appraisal Institute, 2001).

(10.) International Valuation Standards Committee The IVSC - The International Valuation Standards Committee, is a Non-governmental Organisation (NGO) member of the UN, with membership that encompasses all the major national valuation standard-setters and professional associations from 41 different countries. , International Valuation Standards 2000 (London: International Valuation Standards Committee, 2000).

(11.) Accounting profit is computed in accordance with generally accepted accounting practices, whereas economic profit includes deductions for additional implicit business expenses and opportunity costs Opportunity costs

The difference in the actual performance of a particular investment and some other desired investment adjusted for fixed costs and execution costs. It often refers to the most valuable alternative that is given up.
 such as uncompensated uncompensated (n·kômˑ·p  or under-compensated owner work effort.

(12.) G. M. Desmond and R. E. Kelley, Business Valuation Handbook (Los Angeles Los Angeles (lôs ăn`jələs, lŏs, ăn`jəlēz'), city (1990 pop. 3,485,398), seat of Los Angeles co., S Calif.; inc. 1850. : Valuation Press, 1980): 168.

(13.) 407 F2d 1107, 1973.

(14.) B. N. Boyce, Real Estate Appraisal Terminology (Cambridge, MA: Ballinger, 1975).

(15.) Robert W. Ingram and Bruce A. Baldwin, Financial Accounting: A Bridge to Decision Making, 3rd ed. (Cincinnati: South-Western College Publishing, 1998).

(16.) Desmond and Kelley.

(17.) J.J. Weygandt, D. E. Kieso, and P.D. Kimmel, Financial Accounting, 2nd ed. (New York New York, state, United States
New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of
: John Wiley John Wiley may refer to:
  • John Wiley & Sons, publishing company
  • John C. Wiley, American ambassador
  • John D. Wiley, Chancellor of the University of Wisconsin-Madison
  • John M. Wiley (1846–1912), U.S.
 & Sons, 1998).

(18.) As cited in S.P. Pratt, Business Valuation Body of Knowledge (New York: John Wiley & Sons, 1998).

(19.) This means that the "going concern premise" applies. i.e., the business is expected to continue operating well into the future. A value estimate made under the going concern premise assumes that the entire business would change hands if it were sold at a price equal to the value estimate.

(20.) The concept of money being an intangible asset is sometimes difficult to grasp because money can be seen, touched, and felt. However, physical money is intrinsically worthless. According to according to
1. As stated or indicated by; on the authority of: according to historians.

2. In keeping with: according to instructions.

 P. A. Samuelson and W. O. Nordhaus, Economics, 13th ed. (New York: McGraw-Hill, 1989), money "is an artificial social convention." Since we abandoned our commodity money (gold) standard, money has been valued for what it can purchase and-the degree to which society honors the statement that its paper money is "legal tender." Thus, cash and equivalents are classified as intangible assets. For in-depth reading on this topic see Samuelson and Nordhaus, "History of Money," 226-230; D. Foley, "Money in Economic Activity," Money, J. Eatwell, M. Miligate, and P. Newman, eds. (New York: W. W. Norton, 1989): 248-262; and B. T. McCallum, "Monetary Standards: Fiat Versus commodity Money," Monetary Economics: Theory and Policy (New York: Macmillan, 1989): 22-24.

(21.) For a more complete discussion of this concept, see the essay on the theory of profit in M. Blaug, Economic Theory in Retrospect (Cambridge: Cambridge University Press Cambridge University Press (known colloquially as CUP) is a publisher given a Royal Charter by Henry VIII in 1534, and one of the two privileged presses (the other being Oxford University Press). , 1985): 458-465.
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Author:Wolverton, Marvin L.; Lennhoff, David C.; Vernor, James D.; Marchitelli, Richard
Publication:Appraisal Journal
Geographic Code:1USA
Date:Jan 1, 2002
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