In accounting, an asset retirement obligation (ARO) describes a legal obligation associated with the retirement of a tangible, long-lived asset, where a company will be responsible for removing equipment or cleaning up hazardous materials at some future date. AROs should be included in a company’s financial statement to present a more accurate and holistic snapshot
What Is Asset Specificity? In economics, asset specificity is the degree to which a thing of value, or even a person of value, can be readily adapted for other purposes. A thing with high specificity is useful only for certain tasks or in certain circumstances. An asset with low specificity is a more flexible resource
What Is Asset Stripping? Asset stripping is the process of buying an undervalued company with the intent of selling off its assets to generate a profit for shareholders. The individual assets of the company, such as its equipment, real estate, brands, or intellectual property, may be more valuable than the company as a whole due
What Are Assets Under Administration (AUA)? Assets under administration (AUA) is a measure of the total assets for which a financial institution provides administrative services and charges a fee for doing so. Assets under administration are beneficially owned and managed by clients who contract with a third-party administration provider. AUA differs from assets under management (AUM)
What Is an Asset Swap? An asset swap is similar in structure to a plain vanilla swap with the key difference being the underlying of the swap contract. Rather than regular fixed and floating loan interest rates being swapped, fixed and floating assets are being exchanged. All swaps are derivative contracts through which two parties exchange financial
What Is the Asset Turnover Ratio? The asset turnover ratio measures the value of a company’s sales or revenues relative to the value of its assets. The asset turnover ratio can be used as an indicator of the efficiency with which a company is using its assets to generate revenue. The higher the asset turnover ratio
What Is an Asset Valuation Reserve (AVR)? An asset valuation reserve (AVR) is capital required to be set aside to cover a company against unexpected debt. The asset valuation reserve (AVR) serves as a backup for equity and credit losses. A reserve will have capital gains or losses credited or debited against the reserve account.
What Is Asset Valuation Review (AVR)? The term asset valuation review (AVR) refers to a process that establishes an estimate of the value of a failed bank’s assets. Banks may fail for a number of reasons. The most common occurrence is when the value of their assets drops below market value—well below their liabilities. The
What Is Assigned Risk? Assigned risk is when an insurance company is required, by state insurance law, to provide coverage for risk that may not find coverage in the general insurance marketplace. In order to compensate insurers for the potential losses associated with such mandated coverage, insurers will often pool funds and share the assigned
What Is an Assignee? An assignee is a person, company, or entity who receives the transfer of property, title, or rights from another according to the terms of a contract. The assignee receives the transfer from the assignor. For example, an assignee may receive the title to a piece of real estate from an assignor.
