A presentation on Form and contents of Valuation Report

1. Valuation Report
- Form and Contents
CA Dr Prithvi Ranjan Parhi
Chartered Accountant and Registered Valuer
Member ICAI RVO
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2. Form and Content of Report
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Form & Content
Nature of the
engagement
Purpose of the
valuation
Depends on

3. Rule 8 : Companies (Registered Valuers and
Valuation) Rules, 2017
• (1) The registered valuer shall, while conducting a valuation, comply
with the valuation standards as notified or modified under rule 18:
• Provided that until the valuation standards are notified or modified by
the Central Government, a valuer shall make valuations as per-
a) internationally accepted valuation standards; or
b) valuation standards adopted by any registered valuers organisation.
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4. Valuation Reporting Framework
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5. Reporting
COMPANIES (REGISTERED VALUERS AND VALUATION) RULES, 2017
Rule #18
• The valuer shall, in his/ its report, state the following:-
1) Background information of the asset being valued;
2) Purpose of valuation and
3) Appointing authority;
4) Identity of the valuer and any other experts involved in the valuation;
5) Disclosure of valuer interest/conflict, if any;
6) Date of appointment, valuation date and date of report;
7) Nature and Sources of information;
8) Procedures adopted in carrying out the valuation;
9) Valuation methodology;
10) Major factors that influenced the valuation;
11) Conclusion; and
12) Caveats, limitations and disclaimers
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6. ICAI Valuation Standard 202
Valuation Report and Documentation
1) Background information of the asset being valued;
2) Purpose of the valuation and
3) Appointing authority;
4) the identity of the valuer and any other experts involved in the valuation;
5) Disclosure of the valuer’s interest or conflict, if any;
6) Date of appointment, valuation date and date of the valuation report;
7) Inspections and/or investigations undertaken; ✓
8) Nature and sources of the information used or relied upon;
9) Procedures adopted in carrying out valuation and valuation standards followed;
10)Valuation methodology used;
11)Restrictions on use of the valuation report, if any; ✓
12)Major factors that were taken into account during the valuation;
13)Conclusion; and
14)Caveats, limitation and disclaimers to the extent they explain or elucidate the limitations faced by valuer,
which shall not be for the purpose of limiting his responsibility for the valuation report.
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7. Reporting
• Where the report is the result of an assignment involving the valuation of an asset or
assets, the report must convey the following, at a minimum:
1) the scope of the work performed, including the elements noted in para 20.3 of IVS 101 Scope
of Work, to the extent that each is applicable to the assignment,
2) the intended use, ✓
3) intended users, ✓
4) the purpose,
5) the approach or approaches adopted, ✓
6) the method or methods applied, ✓
7) the key inputs used,
8) the assumptions made, ✓
9) the conclusion(s) of value and principal reasons for any conclusions reached, and
10) the date of the report (which may differ from the valuation date).
-Para 30.1 :IVS 103 Reporting
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8. Scope of Work
Para 20.3 of IVS 101
• A valuer must communicate the scope of work to its client prior to completion of the assignment, including the
following:
1. Identity of the valuer:.
2. Identity of the client(s) (if any): ✓
3. Identity of other intended users (if any):.
4. Asset(s) being valued:.
5. The valuation currency: ✓
6. Purpose of the valuation:
7. Basis/bases of value used:✓
8. Valuation date:
9. The nature and extent of the valuer’s work and any limitations thereon:
10.The nature and sources of information upon which the valuer relies:
11.Significant assumptions and/or special assumptions:
12.The type of report being prepared:
13.Restrictions on use, distribution and publication of the report:
14.That the valuation will be prepared in compliance with IVS and that the valuer will assess the
appropriateness of all significant inputs:.
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9. Contents of a Valuation Report
-IBBI Guideline September 2020
• Considering the interests of stakeholders and the need for transparency and principles of good corporate governance, the under noted
matters should compulsorily be covered in the Valuation Report, in a clear, unambiguous and non-misleading manner, consistent with the
need to maintain confidentiality:
1. Background Information of the asset being valued;
2. Purpose of valuation and appointing authority;
3. Bases of Value;
4. Premise of Value; ✓
5. Identity of the RV and any other experts involved in the valuation;
6. Intended Users of the Valuation;
7. Disclosure of RV interest or conflict, if any;
8. Date of appointment, valuation date and date of report;
9. Inspections and /or investigations undertaken;
10. Business interest, ownership characteristics; ✓
11. Nature and sources of information;
12. Significant Assumptions, if any;
13. Procedures adopted in carrying out the valuation and valuation standards followed;
14. Restrictions on use of report, if any;
15. Major factors that were taken into account during valuation;
16. Conclusion; and
17. Caveats, limitations and disclaimers.
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10. Contents of Valuation Report
SL Rule 18 ICAI -VS IVS IBBI
1 Background information of the asset being valued Y Y - Y
2 Purpose of the valuation Y Y Y Y
3 Scope of Work performed - - Y -
4 Intended Use - - Y -
5 Intended Users - - Y Y
6 Appointing authority Y Y - Y
7 Identity of the valuer and any other experts Y Y - Y
8 Date of appointment Y Y - Y
9 Valuation date Y Y - Y
10 Disclosure of the valuer’s interest or conflict Y Y - Y
11 Inspections and/or investigations undertaken - Y - Y
12 Nature of the information Y Y - Y
13 Sources of the information Y Y - Y
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11. Contents of Valuation Report
SL ICAI -VS Rule 18 IVS IBBI
14 Premise of Value - - - Y
15 Business Interest & Ownership Characteristics - - - Y
16 Procedures adopted in carrying out valuation Y Y - Y
17 Valuation standards followed Y - - Y
18 Valuation methodology used Y - - -
19 Valuation Approach - - Y -
20 Valuation Methods - - Y -
21 Key Inputs used - - Y -
22 Major factors that were taken into account Y Y - Y
23 Conclusion with reasons Y Y Y Y
24 Assumptions - - Y Y
25 Restrictions on use of the valuation report Y - - Y
26 Caveats, limitations and disclaimers Y Y - Y
27 Date of the valuation report Y Y Y Y
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12. Signature
• The valuation report shall include the signature of valuer
along with the name of entity (in case an entity is
appointed) appointed for the valuation assignment.
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13. Additional Info
• In addition to the minimum contents as discussed, if the
valuer believes that certain additional information will be
useful to the user for a better understanding of the valuation,
the valuer may include such additional information in the
valuation report.
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14. Caveats, limitations and disclaimers
• A valuation report should not carry a disclaimer, which has
- potential to dilute the responsibility of the RV or
- makes the valuation unsuitable for the purpose for which the
valuation was conducted.
• Illustrations are provided in IBBI Guideline.
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15. CA Dr Prithvi Ranjan Parhi 15
Valuation Approaches
As per ICAI Valuation Standards
Market Approach, Income Approach, Cost Approach,
Market Price Method
Comparable Companies
Multiple Method
Comparable Transaction
Multiple Method
Discount Cash Flow Method
Earning Capitalisation
Method
Dividend Discount Models
Intangible Asset Valuation
Option Pricing Models
Relief from Royalty Method
Multi Period Excess Earning
Method
With and Without Method
Replacement Cost
Method
Reproduction Cost
Method

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Valuation Bases
IVS Defined Valuation Base
1. Market Value
2. Market Rent
3. Equitable Value
4. Investment Value /Worth
5. Synergistic Value
6. Liquidation Value
Other Valuation Base
1. Fair Value
2. Fair Value (Legal)
3. Fair Market Value (OECD)
4. Fair Market Value(US-IRS)
ICAI Valuation Base
International Valuation Standard 104 ICAI-Valuation Standard 102
1. Fair Value
2. Fair Value (Legal)
3. Fair Market Value (OECD)
1. Fair Value
2. Participant Specific
Value
3. Liquidation Value

17. Premise of Value
Para 37 & 38 of ICAI-VS 102 Bases of Value
• Premise of Value refers to the conditions
and circumstances how an asset is
deployed.
• In a given set of circumstances, a single
premise of value may be adopted while in
some situations multiple premises of value
may be adopted.
• Some common premises of value are as
follows:
1. Highest And Best Use;
2. Going Concern Value;
3. As Is Where Is Value;
4. Orderly Liquidation; Or
5. Forced Transaction.
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1. Highest And Best Use Value
2. Going Concern Value
3. As Is Where Is Value
4. Orderly Liquidation
5. Forced Transaction
Premises
of
Value

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Valuation Premises
As per ICAI-VS 102 :Valuation Bases
1. Highest And
Best Use Value
2. Going
Concern Value
3. As Is Where
Is Value
4. Orderly
Liquidation
5. Forced
Transaction
Value at HABU
Conversion Cost
to be considered
Realizable value
of an asset on
liquidation after
allowing
appropriate
marketing efforts
and a reasonable
period of time
Seller is under
constraints to
sell an asset
without
appropriate
marketing
period or effort
Value of a
business
enterprise that
is expected to
continue to
operate in the
future
Value
Considering
the Existing
use of the
asset

19. Thank You.
prithvi.baps@gmail.com
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