Page 104 - RISK Management IC86 Ebook
P. 104
Risk Management
on the purpose or emphasis of valuation. For personal property,
market value is the preferred method whereas for risk
management purposes the preferred ones are last two of the
eight methods listed below:
l Original cost - i.e. the money paid for acquisition of the
property. This method has many weaknesses in as much
as it (a) depends on the bargaining capacity of the owner
at the time of acquisition, (b) ignores physical depreciation
or wear & tear and (c) technological, trend, fashion or
other changes.
l Original cost less accounting depreciation - This
method also suffers many weaknesses for its dependence
on original cost as also the accounting depreciation does
not take into account factors of inflation and physical or
technical depreciation.
l Market value - In case of real estate, the market value
depends on demand and supply situation in the market
and is established by obtaining offers for purchase.
l Tax appraisal value - This value is purely for tax purposes
and may vary from place to place depending on the local
tax levels.
l Economic or use value - This method recognizes
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