Discussing The Value Assessment In Property Transaction: The Case Of WB Company

WB is a subsidiary of China Ordnance Automation Research Institute (COARI) which is a shareholder at ratio of 71%, and focuses on defense equipment development and production. In order to further strengthen COARI base business such as defense equipment development, and speed up the industrialization development, COARI made a decision to assign WB shares to a company which recognized WB.In order to assess WB's value, COARI invited an assess company using the replacement cost approach to assess WB's fixed assets and current assets. WB's value was RMB 27 million. Furthermore, the assess company concluded that WB is the lead over local sensor companies and good at profitability and prosperity. As its brand, technology and management skills are hard to quantize, a patent right was selected as a representative intangible asset to be assess. The patent right's value was RMB 2.1 million. So the total value of WB was assessed to be RMB 29.1 million. But COARI insisted that the assessment did not catch up with WB's profitability and prosperity regarding WB's brand, technology and management skills.This article focuses on such problem and analyzes how to apply the replacement cost approach to assess WB's brand, technology and management skills, in order to get a more reasonable value for property transaction. The first part of this article concludes a problem from the case, and also introduces its background and reference for property transaction. The second part of this article is for full introduction and analysis on WB, especially for its overage profitability.The third part of this article is for WB assessment result and method introduction, especially for the replacement cost approach introduction and its limits over WB intangible assets assessment and ignorance over WB total intangible assets assessment.The forth part of this artic puts forward the assess method suitable for WB, which can both assess the tangible assets, and also assess the intangible assets totally.The replacement cost approach ignores the assets combination profitability, and ignores innovation, management skills, development and long term compatible profitability. Since for WB assessment, both tangible assets and intangible assets should be concluded in, the extra income approach is applied for intangible assets combination assessment. Intangible assets are not separated from a company. Most of the intangible assets are included in its company and reflected by profitability. For WB, it is the same. Although it is hard to assess WB's brand, technology, and management skills separately, but these intangible assets combination is reflected by an extra income.In conclusion, for the WB assessment, both tangible assets and overage profitability intangible assets are considered and processed, by using the extra income approach to get a more reasonable value.