How to perform an assets assessment within a functional Analysis

In assessing assets, you should determine if these are present or owned by each party in the transaction and, if yes, to what extent.

You should look at actual assets. One of the checks is by looking at the financials of a company as “assets” often stated on the balance sheet of a company. Other assets are more intangible in nature (e.g., intellectual property owned or licensed, human capital, etc.) and often not reflected on the balance sheet. The value add of these assets will depend on the actual having of the asset (can be ownership, leasing, or rent) as well as the importance of the asset for the organization as well as the magnitude of the capital expenditure, depreciation, related (revaluation) costs, leasing, rental, license, or other payments. Here are a few examples of the most common assets:

1. Tangible assets are typically physical assets or property owned by a company, such as computer equipment. Tangible assets are the main type of assets that companies use to produce their product and service.

2. Plant, Property, and Equipment (“PP&E”) are particular types of tangible assets and refer to a company’s physical or tangible long-term assets that typically have a life of more than one year. Examples of PP&E include buildings, machinery, land, office equipment, furniture, and vehicles. It may also include computer software. Companies list their net PP&E on their financial statements.

3. Intangible assets are typically nonphysical assets used over the long term. Intangible assets are often intellectual assets, and as a result, it’s difficult to assign a value to them because of the uncertainty of future benefits. Intangible assets are non-physical assets that add to a company’s future value or worth and can be far more valuable than tangible assets. Intangible assets are intellectual property that includes:

• Patents, which provide property rights to an inventor
• Trademarks are recognizable phrase or symbol that denotes a specific product and differentiates a company
• Franchises are a type of license that a party (franchisee) buys to allow them to have access to a company’s brand and sell goods under their name
• Goodwill represents the value above and beyond a target company’s assets that another company pays to acquire them
• Copyrights represent intellectual property that’s protected from being duplicated by non-authorized parties
• Depending on the type of business, intangible assets may include internet domain names, performance events, licensing agreements, service contracts, computer software, blueprints, manuscripts, joint ventures, medical records, permits, and trade secrets/know-how.

4. Financial capital refers to how companies invest in their businesses (also referred to as capital expenditure or CAPEX). They use capital to buy more equipment, buildings, or materials, which they then use to make goods or provide services. A business’s capital assets can also include cash and investments.

5. Working capital refers to the amount of available capital that a company can readily use for day-to-day operations calculated as the current assets minus the current liabilities. Current refers to assets and liabilities that are present for less than one year (e.g., typically stock, trade receivables/liabilities).