Professional judgment is really important when we try to figure out how much investments are worth, especially when we can't just look up a price. Here are some main points to keep in mind:
Estimating Fair Value: Fair value isn't always easy to find. We have to use models and make choices based on what seems right to value these assets.
Choosing Inputs: When we use a valuation model, like discounted cash flow or comparing recent sales, we need to decide which factors to include. This could be things like growth rates or discount rates, and figuring this out takes careful thinking and understanding of the situation.
Market Conditions: The value can change based on market conditions. We have to think about how swings in the market might affect our estimates. This requires careful and thoughtful professional judgment.
Activity Context: Different industries or types of investments can change our perspective on value. Knowing the background helps us make better guesses about what things are worth.
From what I’ve seen, using professional judgment isn't just about sticking to rules. It’s about understanding what’s really happening and making sure our values match reality as closely as possible.
Professional judgment is really important when we try to figure out how much investments are worth, especially when we can't just look up a price. Here are some main points to keep in mind:
Estimating Fair Value: Fair value isn't always easy to find. We have to use models and make choices based on what seems right to value these assets.
Choosing Inputs: When we use a valuation model, like discounted cash flow or comparing recent sales, we need to decide which factors to include. This could be things like growth rates or discount rates, and figuring this out takes careful thinking and understanding of the situation.
Market Conditions: The value can change based on market conditions. We have to think about how swings in the market might affect our estimates. This requires careful and thoughtful professional judgment.
Activity Context: Different industries or types of investments can change our perspective on value. Knowing the background helps us make better guesses about what things are worth.
From what I’ve seen, using professional judgment isn't just about sticking to rules. It’s about understanding what’s really happening and making sure our values match reality as closely as possible.