Business valuers who comply with the IVSC’s International Valuation Standards (IVS) will have a new update effective the end of the year. BVWire—UK has reviewed the relatively minor updates to IVS 200, the section specific to business and business interests valuation. Primarily, section 200 now clarifies the expected business valuation methods in companies with complex capital structures including forms of equity beyond common stock.
The new ‘complex capital structure’ paragraph 130.5 states:
[V]aluers may use any reasonable method to determine the value of equity or a particular class of equity. In such cases, typically the enterprise value of the business is determined and then that value is allocated between the various classes of debt and equity. Three methods that valuers could utilise in such instances are discussed in this section, including:
(a) current value method (CVM);
(b) option pricing method (OPM); and
(c) probability-weighted expected return method (PWERM).
In addition, the January 2020 update includes the new intangible asset standards chapter ‘IVS 220 Non-Financial Liabilities.’
BVWire—UK will provide updates and analysis regularly as the effective date of the new IVS approaches.
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