The IVS are once again under agenda consultation, but, like the current 2020 version, some of the most extensive proposed revisions come within IVS 200, the section dedicated to valuing businesses and business interests. This includes updates to professional governance (which will be reviewed by BVWire—UK in a future issue) and particularly in clarification of the definition of business interests.

Here is the red-lined draft of the proposed additions to IVS 200 Businesses and Business Interests:

20.1. The definition of what constitutes a business, may differ depending on the purpose of a valuation, but generally involves an organisation or integrated collection of assets engaged in commercial, industrial, service or investment activity. Generally, a business would include more than one asset (or a single asset in which the value is dependent on employing additional assets) working together to generate economic activity that differs from the outputs that would be generated by the individual assets on their own. A collection of Plant and Equipment (IVS 300 Reporting) and/or Real Property Interests (IVS 400 Real Property Interests) without the presence of other assets, or intangible components such as a workforce, would typically not be a business.

20.2 Individual intangible assets, or a group of intangible assets might not constitute a business but would nonetheless be within the scope of this standard if such assets generate economic activity that differs from the outputs that would be generated by the individual assets on their own. If the assets do not meet these criteria, a Valuer should defer to IVS 210 (Intangible Assets) and IVS 220 (Non-Financial Liabilities).

20.3 The commercial, industrial, service or investment activity of the business may result in greater economic activity (i.e., value), than those assets would generate separately. The excess value is often referred to as going concern value or goodwill. This excess value may constitute a separate asset under certain bases of value in certain situations. The absence of excess value does not automatically mean that the asset or group of assets does not constitute a business. In addition, economically, substantially all of the value of assets within a business may reside in a single asset.

20.4 Businesses can take manylegal forms, such as corporations, partnerships, joint ventures and sole proprietorships.However, businesses could take other forms such as a division, branch, line of business, segment, cash generating unit, and asset group that can consist of parts of one or more legal entities.

20.5 Interests in a business (e.g., securities) can also take many forms. To determine the value of a business interest, a valuer should first determine the value of the underlying business by applying these standards. In such instances, business interests should be within the scope of this standard but depending on the nature of the interest certain other standards may be applicable.