Conditions of application: this method is especially suitable for newly established businesses, and the database is mainly financial reports (Hoang et al., 2011).
(4) Goodwill method
This method uses enterprise value criteria that include not only tangible asset value criteria but also intangible asset (TSVH) value criteria.
The criteria for determining enterprise value are calculated as follows:
V 0 = V H + GW
In there
V 0 : Enterprise value V H : Net asset value GW: Business advantage
Conditions of application: suitable for businesses with a long history or businesses with products associated with famous brands, occupying a high market share and being favored by consumers (Hoang et al., 2011).
2.1.5. Content of criteria for determining the value of state-owned enterprises
a. Criteria for determining enterprise value by asset method
The asset method is a method of determining enterprise value based on assessing the actual value of all existing assets of the enterprise at the time of determination.
Applicable subjects are enterprises converting business types, equitized enterprises, except for enterprises that are required to apply the discounted cash flow method.
The time to determine the enterprise value is the time to close the accounting books and prepare financial statements to determine the enterprise value. In case of applying the asset method, it is the end of the quarter closest to the time of having
Decision on equitization but not more than 6 months from the time of announcing the enterprise value
The actual value of an enterprise is the actual value of all criteria for the enterprise's existing assets at the time of determining the value taking into account the enterprise's profitability.
For financial and credit institutions, when determining the value of an enterprise by the asset method, the results of financial statement audits are used to determine capital assets in cash and debts, but must conduct an inventory and evaluation of fixed assets, long-term investments and land use rights values according to State regulations (Hoang et al., 2011).
b. Criteria for determining enterprise value by discount method
The discount rate method (DCF) is a method of determining the value of a business based on the future profitability of the business.
The discounted cash flow (DCF) method is a method of determining the value of a business based on the future profitability of the business, regardless of the value of the business's assets. The profitability of the corporation is determined based on the profit of the State-owned enterprise according to the provisions of the financial regulations of the State-owned enterprise. In case the enterprise invests capital in another enterprise, the profit from the capital invested in the other enterprise is used to determine the value of the enterprise.
Criteria for determining business value.
The actual value of the Enterprise at the time of valuation by the discounted cash flow method is determined according to the following criteria:
business
Actual value= | Actual value of the part State capital | + | Actual debt payable | + | Funding sources career |
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In there:
Actual debt payable = Total debt payable on accounting books minus (-) Value of debts not to be paid plus (+) Land use right value of assigned land area.
+ The actual value of state capital in an enterprise is determined as follows:
= | ∑ () ( ) |
( ) | + | Difference in value of land use rights received for transfer or lease |
In there:
- The difference in land use right value is determined according to the provisions in Point 5, Part a, Section III of this Circular.
(
( )
) : Is the present value of the dividend of year i
( )
: Is the present value of the state capital in year n
i: Order of successive years from the year of determining enterprise value (i:1->n)
: Profit after tax used to pay dividends in year i N: Is the number of future years selected (3-5 years)
: The value of state capital in year n is determined by the formula:
=
: The amount of profit after tax used to pay expected dividends for year n+1
The discount rate or rate of return required by investors when purchasing shares and is determined by the formula
: The rate of return earned from risk-free investments is calculated using the interest rate of 5-year government bonds at the time closest to the time of determining the enterprise value.
: The risk premium rate when investing in buying shares of companies in Vietnam is determined according to the international stock risk premium index table in the valuation index or determined by valuation companies for each enterprise but does not exceed the rate of return from risk-free investments ()
The annual growth rate of dividends and is determined as follows:
In which: b is the ratio of after-tax profit retained to supplement capital
R is the ratio of after-tax profit to average equity of future years.
2.2. Practical basis for criteria for determining the value of forestry enterprises
2.2.1. Contents of criteria for determining the value of state-owned enterprises in the forestry production sector
2.2.1.1 Value of short-term assets of the enterprise
Short-term value includes current assets and short-term investments. Detailed data on the value of current assets and short-term investments at enterprises are often compiled from the enterprise's balance sheet at the end of the accounting year according to form B01-DN (Issued under Circular No. 200/2014/TT-BTC dated December 22, 2014).
/2014 of the Ministry of Finance) closest to the time of determining the enterprise value:
- Cash and cash equivalents: Cash includes cash, deposits and valuable papers (credit notes, bonds...) of the enterprise. For cash and bank deposits, the asset value is determined based on the debit balance of the cash account (account 111) and the bank deposit account (account 112).
- Short-term receivables: Including receivables from customers, internal receivables, material compensation caused by individuals inside and outside the enterprise.
- Inventory index: Inventory is assets held for sale in the normal production and business period; in the process of unfinished production and business; raw materials, materials, tools, and instruments for use in
production - business or service provision process. Inventory accounts for a large part of the business assets ratio of an enterprise, because revenue from inventory is one of the basic sources of generating revenue and additional income for the enterprise later.
- Short-term financial investments: Financial investment is one of the means of making money for everyone, not only for monetary business organizations and business enterprises, but also for individuals in the economy to invest through the financial market. Short-term financial investments include: Corporate bonds with a term of less than 12 months, Treasury bills, Bank bills, Savings deposits, deposit certificates with a term of less than 12 months, using capital mobilized from individuals and other organizations to contribute capital to another organization with a capital recovery period of within 1 year, other short-term investments.
2.2.1.2. Value of tangible fixed assets and long-term investments of the enterprise
According to Circular 200/2014/TT-BTC regulating tangible fixed assets and long-term investments:
- Tangible fixed assets are assets in physical form held by an enterprise for use in production and business activities, in accordance with the standards for recording tangible fixed assets. Assets recorded as tangible fixed assets must simultaneously satisfy four standards:
+ Certainly gain future economic benefits from using that asset
+ The original cost of the asset must be determined reliably.
+ Meets the value standards according to current regulations
Tangible fixed assets in businesses often include assets such as: buildings, structures, machinery and equipment, means of transport, livestock, perennial gardens, fixed assets used in management, etc.
The valuation of tangible assets only determines the value of assets that the company continues to use. The actual value is calculated according to the formula:
Actual value of fixed assets = Original price calculated according to market price x Remaining quality of fixed assets at the time of valuation.
- Long-term investments: Are assets, capital that enterprises spend to invest in real estate business, invest in subsidiaries, contribute capital to joint ventures, associates and other investments with the purpose of making profits and the investment recovery period is over one year or exceeds a normal business cycle.
2.2.1.3. Value of intangible assets of the enterprise
Currently, there are 3 ways to determine the value of intangible assets including: Determining the value of intangible assets by market, determining the value of intangible assets by cost and determining the value of intangible assets by income (TT- 200-BTC , 2014).
- Determining the value of intangible assets according to the market: The value of intangible assets is determined based on comparison and analysis of information of similar intangible assets with transaction prices on the market.
- Determining the value of intangible assets based on cost: Estimating the value of intangible assets based on the cost of reproducing an intangible asset identical to the original asset to be valued or the replacement cost to create a similar intangible asset with the same function and use at current market price.
The formula to estimate the GTTSVH by cost is as follows:
Estimated value of TSVH = Reproduction cost (Replacement cost) - Accumulated depreciation + Manufacturer's profit
- Determining the value of intangible assets based on income: Determining the value of intangible assets through the present value of income, cash flows and cost savings generated by intangible assets. The value of intangible assets is the present value of the income stream obtained from intangible assets in the future with an appropriate discount rate. The discount rate according to the income method needs to reflect the time value of money and the risks related to income from intangible assets.
2.2.1.4. Accounts receivable in the enterprise
In the course of doing business, when a business supplies goods and products to customers but has not yet received payment, accounts receivable will be created. In addition, accounts receivable also arise in cases of compensation, temporary loans, advances to sellers, advances, deposits, and pledges. Thus, accounts receivable are assets of the business held by others (TT- 200-BTC , 2014).
- Customer receivables are debts formed due to the business's credit policy towards customers. This is often the part that accounts for a large proportion of the business's total receivables.
- Internal receivables are debts arising from payment relationships between superior units and subordinate units, or between internal units with separate accounting organizations within a company or corporation regarding capital allocation, internal sales, payments on behalf of others, internal distributions... according to the financial regulations of each unit.
- Advance is a debt that represents the right of the enterprise to the employees in the unit when advancing money to perform a business task of the enterprise.
- Pledge, deposit, or collateral is a debt that arises when a business takes assets out of the unit to pledge, deposit, or collateralize at another unit according to the requirements of economic transactions.
- Other receivables.
2.2.1.5 Liabilities in the enterprise
According to General Accounting Standard (VAS 01) paragraph 18: Liabilities are current obligations of the entity arising from past transactions and events that the entity must settle from its resources.
Liability recognition standards
Liabilities are recognized when both of the conditions specified in General Standard paragraph 42 are satisfied as follows:
- There is sufficient certainty that the entity will use a certain amount of money to cover current obligations that the enterprise must pay; and:
- The liability must be reliably determined. Liabilities include:
- Accounts payable to suppliers is the debt that a business commits to pay to the seller when purchasing materials, goods, fixed assets or receiving services.
- Taxes and other amounts payable to the state are the amounts that enterprises are obliged to pay to the state for mandatory financial payments such as indirect and direct taxes; fees and other amounts payable arising under the prescribed regime.
- Payables to employees are current obligations of the enterprise arising from the event of owing employees for salaries, wages, bonuses, social insurance and other payable amounts belonging to their income.
- Internal payables include payables for collection, payment, products, goods, services provided but not yet paid and some other amounts between the main unit and affiliated units and between affiliated units with each other.
- Short-term loans are loans from banks and credit institutions or other economic units to finance mainly working capital for all 3 stages of the production process. These are loans that businesses must repay within 1 year or within 1 business cycle.
- Long-term loans are loans with a repayment period of more than 1 year. These loans are used by businesses to finance investment in construction, technical improvements, business expansion or for long-term financial investment.