People regarded the 21st century as the age of information. It’s in this era of technology where consumers of all sizes treat data as a commodity. As the exchange of data prevails, people began to need a way to measure the value of information properly.
This is where data valuation comes in. Data Valuation is a practice that involves assessing the worth of the data and information. This method consists of expertise from an Accountant and an IT because of the integration of the computing system.
But exactly why is data valuation truly important?
Fair Representation
An entity firm’s array of data is unquestionably a part of the business’ assets. Specifically, the firm’s collected, analyzed, and treated data sets are part of the intangible assets. It’s only natural for the enterprises’ accountants to include these intangible assets within their Financial Statements.
With the use of data valuation methods, accountants can now properly assess the worth of these data sets. Concluding the process, data valuation reports give the data sets an accurate and fair representation within the pages of the balance sheets. This fair representation is important in communicating all financial information to all financial users.
Monetization
The economic landscape is fast-changing, and so are the types of industries present. Today’s contemporary entrepreneurial setting features the interaction and utilization of data as both inputs and outputs. With data and its industry holding a lot of demand, some entities will quickly take advantage of these surging demands.
This demand is where data valuation comes in. Data valuation is an accurate and objective take on providing quantifiable figures on assets with hardly any fair-value markets available.
Valuation also gives credibility to the monetary value of the assets. This is because there are no reliable alternatives that assess the worth of these intangible assets. There are no established markets either where businesses can look up the asset’s fair values.
Asset Investment
Most firms and businesses find it arduous to figure out the value of the technical IT investments within the industries. The lack of adapting can be a fatal error, given how the trade of information is already a global phenomenon. This opportunity means any form of obsoleteness in data management can mean the firm’s “going concern” or liquidation.
The company must know how to quantify its IT investments. With a quantified value of their assets, managers can know in which aspects they need to work. Business owners should also take note of how these data contribute to revenue-making within the operations. In this way, managers can allocate their resources properly on aspects that maximize profit.
Mergers and Acquisition
Mergers and acquisition is a process where companies join together through consolidation. As a matter of distinction, a merger includes two equally sized businesses merging into a single entity. Acquisition, however, is more focused on a larger company taking over a smaller one. In both cases, their arrays of data get consolidated when the businesses reduce as a single entity.
Before the actual consolidation of the parties, data valuation is the key to providing a valued figure for both the businesses’ data sets. After the merging process, business owners will use methods in evaluating data for the consolidated data sets.
