Reasons to Question the Value of a Deferred Asset or Justify Capitalization

C

The analyst needs to scrutinize all factors related to the value of deferred assets. Conditions such as rapid obsolescence can considerably shorten the time horizon that a future project's value is based upon. Further, management can be overly optimistic in the estimation of future sales; these sales may fall far short, or they may never materialize. It is the analysts' responsibility to research all facts available and come to an independent conclusion as to the validity of such claims.