VALUATION ALLOWANCE/RESERVE Definition

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VALUATION ALLOWANCE/RESERVE is an allowance to provide for changes in the value of a companys assets, such as depreciation or if an asset is deemed impaired.

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ALLOWANCE FOR DOUBTFUL ACCOUNTS see ALLOWANCE FOR BAD DEBTS.

LIQUIDATION VALUE is a type of valuation similar to an adjusted book value analysis. Liquidation value is different than book value in that it uses the value of the assets at liquidation, which is often less than market and sometimes book. Liabilities are deducted from the liquidation value of the assets to determine the liquidation value of the business. Liquidation value can be used to determine the bare bottom benchmark value of a business, since this should be the funds the business may bring upon valuation. Liquidation can be either "orderly" or "forced".

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