Presentation1 sfm
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The document discusses valuation services and their purposes. Valuation is a complex process that considers financial and historical factors to determine the value of a business. Valuations can be performed for transactions like mergers or litigation, as well as for tax and financial reporting compliance. The objectives of valuation standards are to promote best practices, transparency, quality, and public confidence in valuation services.
Presentation1 sfm
- 1. Concept Purpose & Objective VALUATION SERVICES (Valuation Engagement) Monday, December 5, 2011 SFM
- 2. Prepared By: NAME ROLL NO. Vinay Sharma 44 Manish Agarwal 47 Neeraj Agarwal 48 Md. Shahrukh Asdque 54 Harsh Agarwal 56 Monday, December 5, 2011 SFM
- 3. Concept Business valuation is a complex process and it involves a multitude of factors ranging from financial matters to historical perspectives. It is a broad and technically challenging discipline. The valuation is performed in a variety of contexts and for a variety of purposes. The word “value” means different things to different people and the result will not be the same, should the context change. A valuation is not an exact science. The value is subjective term and can have a different connotation. Valuation involves use of professional judgments, knowledge of business, analysis of facts, interpretations and used of different methods and procedures, which may result into different value in each given situation. This implies that the business value must be measured and defined by a ‘standard of value’ that is relevant, meaningful and reliable. Monday, December 5, 2011 SFM
- 4. Defination The process of examining various economic factors of a business using predetermined formulas to assess the value of the business or an owner’s interest in a company . Business valuation may be conducted to provide an accurate snapshot of the company’s financial standing to present to current or potential investors . The Internal Revenue Service requires that a business be valued based on fair market value Monday, December 5, 2011 SFM
- 5. PURPOSE Valuations of businesses, business ownership interests, securities, tangible or intangible assets (hereinafter collectively referred to as business valuations) may be performed for a wide variety of purposes . Monday, December 5, 2011 SFM
- 6. Purpose 1 Valuation for financial transactions such as acquisitions, mergers, leveraged buyouts, initial public offerings, employee stock ownership plans and other share based plans, partner and shareholder buy-ins or buyouts, and stock redemptions Monday, December 5, 2011 SFM
- 7. Purpose 2 Valuation for Dispute Resolution and/ or litigation/pending litigation relating to matters such as marital dissolution, bankruptcy, contractual disputes, owner disputes, dissenting shareholder and minority ownership oppression cases, employment disputes and intellectual property disputes. Monday, December 5, 2011 SFM
- 8. Purpose 3 Valuation for Compliance-oriented engagements, for example: (a) Financial reporting and (b) Tax matters such as corporate reorganizations; income tax, Property tax, and Wealth tax compliance; purchase price allocations; and charitable contributions. Monday, December 5, 2011 SFM
- 9. OTHER Purposes The same business may have different values if different standard of value is used and different approaches are adopted. The rising demand for valuation services has given new avenues for the finance professionals. Going forward more and more professional would be engaged in performing valuation services. Recognizing these facts the ICAI has developed this Business Valuation Practice Standard for the following purposes: Provide guidance to the Valuers in performing valuation services Define general valuation concepts, principles, approaches, practice, procedures and methods Define basis of valuation and premise of valuation Set out a code of conduct Monday, December 5, 2011 SFM
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- 11. In particular, the objectives of the BVPS are: To promote ‘best practices’ and fairness in valuation services To promote credibility, relevancy & transparency of valuation information. To enhance quality, consistency, comparability and uniformity of valuation practice To cover valuation of all assets, liabilities and businesses (cash flows) To enhance reliance on the valuation amongst stakeholder To improve corporate governance To improve public confidence in valuation To improve market efficiency Monday, December 5, 2011 SFM
- 12. VALUATION SERVICES Monday, December 5, 2011 SFM
- 13. Valuation engagement The objective of a valuation engagement is to express an unambiguous opinion as to the value of a business, business ownership interest, security or intangible asset which opinion is supported by all procedures that the appraiser deems to be relevant to the valuation. A Valuation Engagement requires that a Valuer apply valuation approaches or methods deemed in the analyst’s professional judgment to be appropriate under the circumstances. In such an engagement, a Valuer is free to apply the valuation approaches and methods he or she deems appropriate in the circumstances. Monday, December 5, 2011 SFM
- 14. A valuation engagement has the following qualities Its conclusion of value is expressed as either a single amount or a range It considers all relevant information as of the appraisal date available to the Valuer at the time of performance of the valuation The Valuer conducts appropriate procedures to collect and analyze all information expected to be relevant to the valuation The valuation considers all conceptual approaches deemed to be relevant by the Valuer. Monday, December 5, 2011 SFM
- 15. VALUATION METHODOLOGY In performing a valuation engagement, the Valuer should: Define the Standard and Premise of Value Analyze the subject interest and collect the necessary Information Adjust the Financial Statement appropriately Consider and apply appropriate valuation approaches and methods Valuation adjustments Conclusion of value Subsequent Events Prepare and maintain appropriate documentation Even though the above mentioned procedure is presented in a manner that suggests a sequential valuation process, valuations involve an ongoing process of gathering, updating, and analyzing information. Accordingly, the sequence of the requirements and guidance in this Standard may be implemented differently at the option of the Valuer. Monday, December 5, 2011 SFM
- 16. THANK YOU Monday, December 5, 2011 SFM