Companies' "book values" are generally much less than their stock market valuations because
A)auditors tend to err on the conservative side.
B)accountants are generally required by accounting standards to ignore the value of brands and all other reputational assets.
C)to be on the safe side accountants tend to undervalue brand values.
D)accountants and marketing experts have different methods of valuing brands.

Question

Quizplus · Accepted Answer

Accounting standards require that the value of intangible assets such as brands and reputational assets be excluded from book value calculations. Since these intangible assets can often be significant drivers of a company's stock market value, this can lead to a difference between book value and stock market valuation. Auditors and accountants aim to provide a conservative estimate of a company's value, but undervaluing brand values is not intentionally done to be on the safe side. Accounting standards dictate that intangible assets not be included in book value calculations. The difference between book value and stock market valuation is mainly due to the difference in how accountants and marketing experts value intangible assets such as brands.

Companies' "Book Values" Are Generally Much Less Than Their Stock