1. The existing asset appraisal methods find it difficult to reflect the true value of an enterprise.
In developed Western countries such as Europe and America, research on the theory of enterprise value evaluation has already become relatively mature and is widely applied in practice. However, in China, although the theories and methods for individual asset appraisal are beginning to mature, enterprise value appraisal remains a new field of evaluation. A complete theoretical and methodological system for enterprise value appraisal has yet to be formed.
At present, China's value appraisal system mainly relies on the replacement cost method. The so-called replacement cost method refers to a method used when evaluating the value of an enterprise, where the total assets of the enterprise are appraised based on their current replacement capital minus various depletions to calculate the enterprise value. Using this method to evaluate enterprise value essentially starts with the appraisal of individual assets. Each asset is assessed separately according to its own characteristics and usage conditions, determining the individual values of each component asset by subtracting depreciation from the replacement capital. Finally, all assets are summed up.
However, the overall value of an enterprise does not equal the sum of the values of its individual assets. Therefore, evaluating the value of an enterprise mainly involves assessing the asset whole that has appreciated, which is evaluating the benefits generated by its future service potential. In other words, value appraisal should be an assessment of the intrinsic and economic value of an enterprise. The cost method, however, focuses on the current replacement value of assets. Strictly speaking, the cost method is not a scientific method for evaluating enterprise value, making it difficult to reflect the enterprise's true market value.