Valuation Applications

There are three primary approaches to the financial valuation of businesses: the asset approach, the market approach and the income approach. Generally, the asset approach addresses a firm's balance sheet; the market approach compares the firm's historical financial performance to similar public, private, or acquired businesses; and the income approach identifies the present value of expected future cash flows.

Asset Approach
Market Approach
Income Approach

The Financial Accounting Standards Board (FASB), June 2001, Statement of Financial Accounting Standards No. 141, Business Combinations, requires business combinations be accounted for by the purchase method. Within FAS 141 are five categories of intangible assets separable from goodwill.

The Financial Accounting Standards Board (FASB) September 1999 Exposure Draft, Business Combinations and Intangible Assets, proposed six categories of intangible assets.