The Appraisal Foundation’s third working group developing best practices for control premiums has issued Valuation for Financial Reporting (VFR) Valuation Advisory #3, The Measurement and Application of Market Participant Acquisition Premiums. These guidelines are in the context of fair value for financial reporting and do not address premiums in other contexts, such as tax or disputes. The fundamental perspective of the working group is that a premium for control is not always warranted. Also, the group recognizes an ongoing need for benchmark data, but they should not be used as the sole input for the estimation of a premium. Auditors (who follow TAF advisories) will scrutinize comparables much more closely in the future.
This is the third VFR advisory TAF has issued; the other two are:
A fourth working group is developing guidelines on valuing contingent consideration.
Please let us know
if you have any comments about this article or enhancements you would like to see.