What are the advantages and disadvantages of cost method in evaluating asset value?

Cost method: refers to the method of pricing long-term equity investment according to the actual cost of investment. This method requires enterprises to increase the book value of long-term equity investment only when increasing long-term foreign investment. The advantages of using the cost method to evaluate assets are:

1. The assets to be appraised must be single or whole assets whose expected future income can be measured in currency;

2. The risk borne by the asset owner must also be measurable by money.

It should be noted that when using the income method to evaluate assets, it is based on the continuous profit of asset investors after use. As a special commodity, in real business, the purpose of people's purchase is often not the asset itself, but the profitability of the asset. If the investment in assets is not for profit, there is no expected return after investment or the expected return is small and unstable, then the income method cannot be used.

Tips: The above contents are for reference only.

Reply time: 202 1-05-25. Please refer to the latest business changes announced by Ping An Bank in official website.

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