Why don't management revalue assets to increase stock prices?

Would this pass FASB principles?

704set

IMO the market generally knows what a company's assets are worth. Fiddling with the books isn't likely to change much. If a company revalued their assets on the books that way, tthe stock would just sell at less of a multiple to book value.

One negative is that companies pay property taxes. Since these directly effect the bottom line, the name of the game is to avoid all that's legally possible.

Jerry

Brablo wrote on 2/18/07 5:27 PM:

If/When you get to college, take Accounting 101......

But aren't property taxes based on assessed property values while property on the balance sheet is lower because of depreciation expense?

704set

Yes, it is illegal in audited financial statements (in the USA) to value fixed assets (land, property, equipment) at its market value, unless the market value if less than the book value. This is called the "lower of cost or market" valuation rule in accordance with GAAP rules.

Certain other kinds of assets, such as stocks and marketable securities can be valued at market value on audited financial statements.

Most stock analysts know what the market value of the assets for a company are, regardless of the book value. This is usually already reflected in the price of the stock.

Yes, property taxes are based on assessed value.

Financial accounting reporting requires that fixed assets be valued at the lower of cost (less accumulated depreciation) or market. Cost (less accumulated depreciation) is known as book value.

To make things a bit more complicated, the tax depreciation rules (because they are determined by tax laws that are often times intended to provide certain incentives) may be different than the depreciation used for financial accounting depreciation calculations. Often times, an asset is depreciated faster for tax purposes than it is for financial accounting purposes.

Kindly point to the research showing a positive correlation between book value and stock prices. Actual book value is only meaningful if you plan to liquidate most or all of a company.

And then it is only relevant to figure out the gains and/or losses on the sale of the assets. As mentioned earlier, gains/losses have to calculated for financial reporting purposes and for tax purposes (which may not be same because of depreciation differences).

Mark:

You did a very good job explaining to me what was going on. I totally forgot about the "Lower of Cost or Market" method of accounting.

You're totally correct about equity analysts making adjustments to the financial statements to adjust for the market value of PPE and other assets. This is reflected in the stock price, I'm sure. I personally think that it would be an outstanding accounting improvement for the voluntary disclosure of 'Market Value of PPE and other Assets.'

Out of 379 companies, the relation between Book Value to Market Cap is R^2 = 0.654953368. Here is my data to prove it:

Market Capitalization x3 book value

426,938,200,000 116,649,781,421 298,959,300,000 36,682,122,699 228,813,600,000 186,027,317,073 205,588,800,000 62,299,636,364 198,523,000,000 58,734,615,385 184,563,300,000 41,197,165,179 177,691,000,000 96,049,189,189 159,166,000,000 25,589,389,068 155,934,200,000 69,613,482,143 150,773,200,000 14,483,496,638 148,435,900,000 28,059,716,446 120,410,000,000 36,710,365,854 114,556,000,000 37,682,894,737 111,822,500,000 18,006,843,800 111,029,200,000 48,064,588,745 106,349,600,000 80,567,878,788 106,078,500,000 16,048,184,569 98,802,330,000 19,259,713,450 91,216,660,000 40,721,723,214 89,496,440,000 15,537,576,389 86,931,770,000 61,653,737,589 81,621,300,000 18,981,697,674 81,451,170,000 27,704,479,592 79,066,480,000 17,151,080,260 73,845,980,000 11,222,793,313 73,072,910,000 10,394,439,545 71,053,160,000 31,579,182,222 68,142,990,000 14,813,693,478 67,608,220,000 11,011,110,749 65,929,830,000 17,304,417,323 61,539,660,000 14,179,645,161 61,186,690,000 35,164,764,368 60,676,230,000 10,284,106,780 58,143,470,000 10,991,204,159 57,690,450,000 13,052,138,009 51,593,370,000 14,783,200,573 50,573,970,000 52,681,218,750 49,749,430,000 15,121,407,295 47,400,620,000 24,559,906,736 46,739,160,000 31,580,513,514 45,437,580,000 10,165,006,711 44,863,940,000 11,357,959,494 44,611,450,000 10,854,367,397 42,255,320,000 23,217,208,791 40,470,080,000 6,813,144,781 40,137,980,000 6,861,193,162 39,841,280,000 10,010,371,859 39,702,550,000 22,180,195,531 39,525,850,000 17,037,004,310 39,025,300,000 4,345,801,782 37,991,730,000 18,807,787,129 37,909,280,000 8,816,111,628 36,114,230,000 9,656,211,230 35,368,410,000 8,130,668,966 35,177,130,000 24,948,319,149 34,310,290,000 1,403,283,845 34,028,660,000 12,556,701,107 32,593,360,000 7,242,968,889 31,808,960,000 17,770,368,715 31,701,880,000 6,302,560,636 30,652,550,000 14,390,868,545 30,073,750,000 17,185,000,000 29,723,900,000 7,110,980,861 29,652,730,000 17,756,125,749 29,627,850,000 10,323,292,683 29,056,460,000 3,305,626,849 28,976,620,000 13,540,476,636 28,918,440,000 7,377,153,061 28,699,150,000 8,912,779,503 27,848,200,000 10,391,119,403 27,594,120,000 14,600,063,492 27,169,780,000 11,611,017,094 26,922,440,000 9,220,013,699 26,592,260,000 8,718,773,770 26,487,080,000 15,049,477,273 26,095,860,000 2,222,816,014 26,038,210,000 5,851,283,146 25,591,730,000 7,461,145,773 25,154,780,000 4,192,463,333 24,999,410,000 8,896,587,189 24,797,770,000 3,031,512,225 24,775,800,000 7,694,347,826 24,526,210,000 6,646,669,377 24,472,930,000 1,695,975,745 24,272,240,000 6,542,382,749 24,134,900,000 5,599,744,780 24,083,450,000 26,465,329,670 23,546,710,000 16,127,883,562 23,266,410,000 8,022,900,000 23,105,060,000 12,557,097,826 22,954,580,000 5,135,252,796 22,899,910,000 13,160,867,816 22,840,640,000 11,363,502,488 22,793,240,000 3,843,716,695 22,767,220,000 5,526,024,272 22,727,910,000 9,924,851,528 22,349,200,000 6,772,484,848 22,331,880,000 7,468,856,187 22,199,590,000 6,587,415,430 22,043,870,000 6,389,527,536 21,434,380,000 13,566,063,291 21,428,100,000 9,652,297,297 21,226,410,000 5,189,831,296 21,190,510,000 13,080,561,728 21,028,690,000 3,186,165,152 20,545,520,000 10,272,760,000 20,239,460,000 2,468,226,829 20,175,340,000 6,169,828,746 20,100,460,000 4,547,615,385 19,932,950,000 38,612,537 19,755,710,000 9,020,872,146 19,594,160,000 5,566,522,727 19,332,260,000 13,614,267,606 19,299,600,000 7,282,867,925 19,279,010,000 6,159,428,115 19,248,640,000 8,554,951,111 19,122,910,000 4,928,585,052 19,007,110,000 6,987,908,088 18,876,180,000 9,391,134,328 18,865,050,000 9,202,463,415 18,694,960,000 4,843,253,886 18,508,240,000 2,701,932,847 18,478,520,000 11,131,638,554 18,434,330,000 4,738,902,314 18,358,470,000 3,999,666,667 18,268,250,000 12,018,585,526 18,041,110,000 5,517,159,021 17,967,640,000 9,074,565,657 17,929,720,000 7,829,572,052 17,926,720,000 5,482,177,370 17,914,890,000 6,709,696,629 17,898,720,000 7,584,203,390 17,771,530,000 4,510,540,609 17,746,260,000 3,689,451,143 17,720,300,000 4,614,661,458 17,705,690,000 4,671,686,016 17,562,800,000 3,028,068,966 17,353,700,000 4,064,098,361 17,155,990,000 9,531,105,556 17,140,810,000 5,790,814,189 17,033,360,000 7,536,884,956 16,930,410,000 6,996,037,190 16,449,960,000 6,092,577,778 16,434,070,000 11,738,621,429 16,406,900,000 6,214,734,848 16,388,010,000 7,693,901,408 16,360,070,000 1,483,233,908 16,356,380,000 4,713,654,179 16,139,450,000 7,796,835,749 16,104,410,000 7,094,453,744 16,081,910,000 5,137,990,415 16,074,210,000 6,898,802,575 15,973,860,000 5,103,469,649 15,832,960,000 5,367,105,085 15,816,780,000 5,549,747,368 15,810,040,000 9,138,751,445 15,800,550,000 6,077,134,615 15,743,330,000 6,078,505,792 15,661,790,000 5,573,590,747 15,607,700,000 1,328,314,894 15,418,260,000 196,486,046 15,357,230,000 2,232,155,523 15,305,340,000 8,409,527,473 15,247,810,000 5,116,714,765 15,244,240,000 1,827,846,523 15,172,460,000 982,672,280 15,097,750,000 3,594,702,381 15,077,690,000 5,866,805,447 14,904,560,000 7,489,728,643 14,844,940,000 1,226,854,545 14,787,710,000 1,958,637,086 14,651,140,000 7,711,126,316 14,550,730,000 7,539,238,342 14,305,100,000 3,824,893,048 14,173,000,000 4,256,156,156 14,112,580,000 2,441,622,837 13,993,260,000 1,962,589,060 13,941,310,000 2,675,875,240 13,798,400,000 1,974,020,029 13,742,650,000 5,245,286,260 13,527,000,000 8,350,000,000 13,446,650,000 4,255,268,987 13,415,840,000 5,081,757,576 13,401,270,000 7,837,000,000 13,375,360,000 2,174,855,285 13,291,740,000 3,356,500,000 13,174,730,000 4,739,111,511 12,955,150,000 4,332,826,087 12,921,190,000 3,609,270,950 12,830,540,000 2,718,334,746 12,820,660,000 5,598,541,485 12,773,100,000 2,752,823,276 12,540,160,000 5,674,280,543 12,537,190,000 9,497,871,212 12,535,250,000 2,424,613,153 12,533,670,000 8,245,835,526 776,964,500 255,580,428 1,677,922,000 843,176,884 1,751,686,000 1,497,167,521 1,891,469,000 875,680,093 2,016,867,000 826,584,836 2,173,551,000 842,461,628 2,236,002,000 76,997,314 2,247,056,000 466,194,191 2,289,719,000 1,174,214,872 2,378,370,000 1,887,595,238 2,678,611,000 2,435,100,909 2,742,044,000 2,176,225,397 2,783,995,000 1,031,109,259 2,811,363,000 739,832,368 2,827,826,000 600,387,686 2,875,015,000 1,529,263,298 2,875,444,000 912,839,365 2,893,312,000 1,468,686,294 2,983,335,000 2,425,475,610 3,058,118,000 1,864,706,098 3,066,461,000 684,477,902 3,096,151,000 1,334,547,845 3,280,530,000 1,648,507,538 3,314,360,000 1,541,562,791 3,459,946,000 1,840,396,809 3,494,370,000 1,474,417,722 3,512,675,000 1,919,494,536 3,524,676,000 1,462,521,162 3,525,013,000 1,686,609,091 3,643,356,000 1,812,614,925 3,650,332,000 931,207,143 3,663,567,000 539,553,314 3,721,332,000 2,283,025,767 3,721,735,000 1,908,582,051 3,829,073,000 2,569,847,651 3,859,918,000 573,539,079 3,894,462,000 1,845,716,588 3,997,485,000 2,365,375,740 4,009,796,000 1,937,099,517 4,166,891,000 1,207,794,493 4,190,120,000 2,354,000,000 4,275,725,000 1,835,075,107 4,329,902,000 2,243,472,539 4,349,964,000 176,397,567 4,371,292,000 806,511,439 4,388,235,000 2,868,127,451 4,404,322,000 2,936,214,667 4,499,256,000 2,045,116,364 4,515,644,000 1,535,933,333 4,539,111,000 959,642,918 4,550,486,000 1,422,026,875 4,610,795,000 956,596,473 4,622,625,000 3,668,750,000 4,633,212,000 2,477,653,476 4,644,953,000 984,100,212 4,669,840,000 3,012,800,000 4,716,592,000 2,985,184,810 4,794,756,000 2,014,603,361 4,834,100,000 1,272,131,579 4,837,304,000 1,176,959,611 4,848,757,000 1,809,237,687 4,882,670,000 2,429,189,055 4,999,600,000 1,351,243,243 5,017,396,000 934,338,175 5,065,133,000 914,283,935 5,067,277,000 3,400,857,047 5,088,945,000 1,241,206,098 5,089,650,000 3,283,645,161 5,246,060,000 1,686,836,013 5,257,757,000 1,701,539,482 5,259,629,000 1,551,512,979 5,282,880,000 2,192,066,390 5,441,303,000 2,440,046,188 5,452,785,000 1,571,407,781 5,605,739,000 1,279,849,087 5,655,755,000 1,193,197,257 5,659,539,000 1,466,201,813 5,688,243,000 362,308,471 5,755,085,000 2,239,332,685 5,802,411,000 1,763,650,760 5,805,074,000 2,359,786,179 5,826,856,000 3,329,632,000 5,842,554,000 1,549,749,072 5,873,784,000 2,090,314,591 5,929,470,000 1,983,100,334 5,991,063,000 1,560,172,656 6,035,443,000 4,867,292,742 6,070,293,000 1,325,391,485 6,130,854,000 4,609,664,662 6,182,574,000 1,437,807,907 6,223,810,000 1,047,779,461 6,387,950,000 2,695,337,553 6,500,234,000 4,814,988,148 6,521,981,000 1,008,034,158 6,590,456,000 2,175,067,987 6,611,905,000 2,092,375,000 6,658,842,000 1,685,782,785 6,826,856,000 7,585,395,556 6,957,117,000 3,119,783,408 6,993,552,000 1,054,834,389 6,994,985,000 5,927,953,390 7,137,534,000 4,575,342,308 7,246,497,000 684,924,102 7,255,157,000 1,553,566,809 7,259,360,000 4,453,595,092 7,288,118,000 1,747,750,120 7,323,139,000 1,817,156,079 7,425,803,000 2,085,899,719 7,493,364,000 2,305,650,462 7,553,246,000 2,127,674,930 7,653,320,000 2,003,486,911 7,718,059,000 5,250,380,272 7,804,816,000 6,450,261,157 7,913,515,000 2,786,448,944 7,960,902,000 1,631,332,377 7,975,693,000 2,778,987,108 7,995,584,000 4,017,881,407 8,109,993,000 2,685,428,146 8,136,424,000 2,450,730,120 8,149,795,000 1,275,398,279 8,221,977,000 5,872,840,714 8,227,500,000 5,919,064,748 8,270,645,000 3,132,820,076 8,304,912,000 1,737,429,289 8,308,232,000 3,310,052,590 8,347,785,000 6,573,059,055 8,509,314,000 1,587,558,582 8,521,954,000 2,470,131,594 8,717,902,000 3,543,862,602 8,748,238,000 6,528,535,821 8,750,269,000 6,434,021,324 8,800,634,000 537,936,064 8,894,885,000 2,887,949,675 8,984,355,000 2,448,053,134 9,000,363,000 6,040,512,081 9,052,626,000 2,145,172,038 9,108,301,000 4,378,990,865 9,139,628,000 4,062,056,889 9,153,931,000 2,109,200,691 9,258,805,000 6,012,211,039 9,291,901,000 65,843,970 9,362,760,000 970,234,197 9,455,948,000 5,696,354,217 9,482,815,000 966,647,808 9,498,077,000 1,911,081,891 9,517,000,000 3,226,101,695 9,628,232,000 4,396,452,968 9,637,611,000 7,034,752,555 9,736,549,000 3,788,540,467 9,744,782,000 843,704,069 9,815,811,000 1,987,006,275 9,828,515,000 3,751,341,603 9,834,988,000 8,264,695,798 9,881,915,000 6,416,827,922 9,961,570,000 3,937,379,447 9,995,916,000 2,799,976,471 10,004,820,000 5,078,588,832 10,110,640,000 4,769,169,811 10,140,380,000 3,017,970,238 10,262,090,000 1,754,203,419 10,314,300,000 1,492,662,808 10,426,400,000 2,500,335,731 10,563,690,000 955,990,045 10,686,620,000 4,047,962,121 10,730,350,000 1,846,876,076 10,803,180,000 3,234,485,030 10,806,720,000 3,150,647,230 10,848,740,000 1,344,329,616 10,885,040,000 1,799,180,165 10,890,640,000 6,560,626,506 10,917,620,000 1,763,751,212 10,960,870,000 2,549,039,535 11,020,810,000 6,931,327,044 11,030,660,000 5,380,809,756 11,035,110,000 5,409,367,647 11,248,380,000 3,439,871,560 11,338,750,000 1,304,804,373 11,675,190,000 2,727,848,131 11,827,220,000 2,913,108,374 11,988,350,000 6,445,349,462 12,046,490,000 8,030,993,333 12,208,370,000 4,787,596,078 12,407,460,000 4,682,060,377

2.123546572 6705831029

0.079382509 1390540983 0.654953368 23892417113

in article snipped-for-privacy@h3g2000cwc.googlegroups.com, Brablo at snipped-for-privacy@yahoo.com wrote on 2/19/07 9:43 AM:

......and this means what???

various asset values (from actual historical costs) means nothing, until the day they sell and the $$ is banked...only then, would or do you "book" the difference...and.....pay tax of the $$ difference....until the day they sell... value is just a "shot in the dark" guess.....

"Method of accounting"

Is that like the method of adding 1 + 1 and arriving at 2 as the correct answer?

You do tell us how much you never learned or know

that we are dumb s**ts for reading his posts

379 companies - you're joking, aren't you? And to top it off you picked the 379. Take 50 NYSE listed utilities and 50 NASDAQ NMS biotech and software companies and show the correlation between market cap and book value. If this method of investing works for you, then use it.

Brablo's post are a breath of fresh air in comparison to many other self serving posts on this newgroup. IMHO

DaveR wrote on 2/22/07 9:37 AM:

That's what makes this country great.....everyone's entitled to an opinion..... I think he and a couple others who have absolutely NO idea which end is up, think that if they have their computers figure some ratios out to 9 decimal places, it has some practical use..... When you see them quote a P/E ratio as 14.012473032, are you more impressed than someone saying the P/E is 14???? It's funny at first to watch their mental masturbation, but when others continue the thread, you wonder how people made money before computers.....