What Is Imputed Value?
Imputed value, also known as estimated imputation, is an assumed value given to an item when the actual value is not known or available. Imputed values serve as logical or implicit values for an item or time set, where a ’true’ value has yet to be determined.
An imputed value would be the best guess estimate used to forecast a larger set of values or data series. Imputed values can pertain to the value of intangible assets owned by a firm, the opportunity cost associated with an event, or the value of a historical item for which specific value data at a past point in time are not available.
Key Takeaways
- Imputed value is a calculated estimate produced when a direct or explicit value is unavailable or impossible to obtain.
- Imputed values might be given to intangible assets held by a firm, such as a patent’s value or other intellectual property.
- Since imputed values are estimates or forecasts, they may be susceptible to error. Caution is advised when interpreting imputed values in financial statements.
Appreciating Imputed Value
Imputed values find utility in a variety of situations. These can include opportunities, intangible assets owned by a business, or historical items whose past value data are not accessible. Additionally, time series data might require estimations to complete a comprehensive set of figures. Ensuring that imputed values are fair estimates often prevents issues in their use.
Economic computations such as GDP also rely on imputed values. A comprehensive picture of economic activity must include some goods and services not traded in the marketplace. These components are referred to as imputations.
Examples encompass services of owner-occupied housing, financial services provided free of charge, personal consumption expenditures (PCE), and employer-provided health insurance. Imputations approximate the price and quantity for these goods or services as if they were market-traded.
Related to imputed value is the concept of imputed cost. An imputed cost arises from using an asset instead of investing in it or pursuing alternative actions. It is an invisible cost, not incurred directly, contrasting with an explicit cost, which is directly incurred.
Excelling with Imputed Value Examples
Opportunity Cost Example
Consider a scenario where XYZ company chooses to invest in Project A over Project B. This decision involves an opportunity cost, expressed as an imputed value, because the precise financial difference between the projects isn’t directly measurable.
Intangible Asset Example
The value of a patent held by ABC company represents an imputed cost. While it is possible to estimate the additional business or revenue generated by the patent and its consequent impact on the company’s value, it’s hard to pinpoint a definitive, concrete dollar amount.
Related Terms: intangible assets, opportunity cost, gross domestic product, personal consumption expenditures, imputed cost, explicit cost, investment.
References
- Bureau of Economic Analysis. “Why Does GDP Include Imputations?”.
