BCA Business Asset Identification & Classification Flashcards
6 cards from real BCA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 BCA Business Asset Identification & Classification flashcards as text
In a BCA appraisal, 'working capital' is typically defined as:
Answer: Current assets minus current liabilities
Working capital is current assets minus current liabilities, representing the short-term liquidity available to sustain daily business operations.
When a BCA appraiser applies the excess earnings method, what two categories of assets must be separately identified?
Answer: Tangible net assets and intangible assets (goodwill)
The excess earnings method attributes a return to tangible net assets and treats the remaining earnings as attributable to intangible value (goodwill).
A BCA appraiser identifies 'leasehold improvements' on site. These are best classified as:
Answer: Tangible personal property affixed to leased space
Leasehold improvements are physical assets installed by the tenant in leased space; they are typically classified as tangible personal property for business valuation purposes.
Why might a BCA appraiser adjust for 'non-operating assets' such as excess cash before applying an income-based valuation method?
Answer: Income methods capture only operating performance, so non-operating assets are added separately to avoid double-counting
Income-based methods value the operating business based on its earnings; non-operating assets like excess cash contribute value but do not generate operating income, so they are added separately.
Which of the following best describes 'trade secrets' in BCA asset classification?
Answer: Technology-based or marketing-based intangibles with legal protection under trade secret law
Trade secrets are intangible assets — formulas, processes, or know-how — legally protected under the Defend Trade Secrets Act and other US laws.
In BCA practice, an appraiser notices significant off-balance-sheet operating leases. Under ASC 842, how should these be treated?
Answer: Recognized as right-of-use assets and corresponding lease liabilities on the balance sheet
Under ASC 842, US companies must recognize operating leases as right-of-use assets and lease liabilities, making them visible balance sheet items relevant to business valuation.