Mr. Chander Sawhney, Partner & Head – Valuation & Deals, Corporate Professionals shared his thoughts as a guest Speaker on Valuation Principles & Techniques in Ind AS at a seminar organised by Gurgaon Branch of ICAI on 3rd September, 2016.
IndAS113 prescribes Fair Valuation definition, Techniques, Application and its Hierarchy. About 75% of the Balance Sheet Size is expected to change due to Fair Value Accounting (#IndAS109 #Financial Instruments, #IndAS102 #Share based payments, #IndAS16 Property Plant Equipments (PPE), #IndAS103 #Business combination etc. shall be impacted using #FairValue. Time to get ready, Plan Prepare and Align with the new requirements...
About Corporate Professionals Valuation Practice
Corporate Professionals Capital Pvt. Ltd. is a SEBI Registered (Cat-1) Merchant Banker and has a successful track record of providing a broad range of M&A and Transaction Advisory Services. Our Dedicated Team has more than 10 years of rich Valuation experience and we have executed more than 500 Corporate Valuations for clients of International Repute across different Context, Industries and Boundaries.
To know more about Our Valuation offerings and how we can help you, please visit us at www.corporatevaluations.in or download our Valuation profile @ http://www.corporatevaluations.in/VALUATION_PROFILE.pdf
CA Varun Sethi IndAS 113 - Fair Value MeasurementsVarun Sethi
Presentation by CA Varun Sethi:
Explains through flowboxes - IndAS 113 - Fair Value Measurements:
1. Scope & Key Concepts
2. Fair Value definition
3. Fair Value framework
4. Fair Value Hierarchy
SWOT analysis - strategic management - Manu Melwin Joymanumelwin
A scan of the internal and external environment is an important part of the strategic planning process. Environmental factors internal to the firm usually can be classified as strengths (S) or weaknesses (W), and those external to the firm can be classified as opportunities (O) or threats (T).
Strategic evaluation and control is one of the last processes to carryout Strategic management hence its necessary to engage in detail the processes of Strategic Management
CA Varun Sethi IndAS 113 - Fair Value MeasurementsVarun Sethi
Presentation by CA Varun Sethi:
Explains through flowboxes - IndAS 113 - Fair Value Measurements:
1. Scope & Key Concepts
2. Fair Value definition
3. Fair Value framework
4. Fair Value Hierarchy
SWOT analysis - strategic management - Manu Melwin Joymanumelwin
A scan of the internal and external environment is an important part of the strategic planning process. Environmental factors internal to the firm usually can be classified as strengths (S) or weaknesses (W), and those external to the firm can be classified as opportunities (O) or threats (T).
Strategic evaluation and control is one of the last processes to carryout Strategic management hence its necessary to engage in detail the processes of Strategic Management
Corporate level strategies are basically about the choice of direction that a firm adopts in order to achieve its objectives.
Corporate strategy is essentially a blueprint for the growth of the firm.
The corporate strategy sets the overall direction for the organization to follow.
It also spells out the extent, pace and timing of the firm’s growth.
AS vs IND AS (Old vs New Indian Accounting Standards)sandesh mundra
This presentation takes one through the differences between Indian GAAP (old) vs IND AS (based on IFRS). All major differences have been covered in addition to IFRS carve outs.
Corporate level strategies are basically about the choice of direction that a firm adopts in order to achieve its objectives.
Corporate strategy is essentially a blueprint for the growth of the firm.
The corporate strategy sets the overall direction for the organization to follow.
It also spells out the extent, pace and timing of the firm’s growth.
AS vs IND AS (Old vs New Indian Accounting Standards)sandesh mundra
This presentation takes one through the differences between Indian GAAP (old) vs IND AS (based on IFRS). All major differences have been covered in addition to IFRS carve outs.
A Presentation given by Mr. Pavan Kumar Vijay, Past President, ICSI, Chairman-Secretarial Standards Board
on Corporate Governance through the eyes of Secretarial Standards.
Mr. Chander Sawhney, Partner & Head – Valuation & Deals, Corporate Professionals shared his thoughts as a guest Speaker on Relative Valuation - Techniques & Application at a Business Valuation Masterclass organised by VC Circle on 31st August, 2016.
Relative Valuation in which value of an asset or liability is done by comparing it to its Peers is pervasive and preferred for ascertaining Fair Value at a point of time as it reflects the market positioning of the Industry and Peers at that time. While Discounted Cash Flow (DCF) method is applied for arriving at Fundamental Valuation, most M&A transaction are based on Relative Valuation multiples (mostly Earnings based). The valuation ratio typically expresses the valuation as a function of a measure of Key Financial Metrics like PE, EV/EBITDA, EV/Sales or Book Value Multiple.
But before using a multiple, one should know the fundamentals determining the multiple and how changes impact it. Sanity check through use of fundamental valuation method like DCF is strongly recommended.
About Corporate Professionals Valuation Practice
Corporate Professionals Capital Pvt. Ltd. is a SEBI Registered (Cat-1) Merchant Banker and has a successful track record of providing a broad range of M&A and Transaction Advisory Services. Our Dedicated Team has more than 10 years of rich Valuation experience and we have executed more than 500 Corporate Valuations for clients of International Repute across different Context, Industries and Boundaries.
To know more about Our Valuation offerings and how we can help you, please visit us at www.corporatevaluations.in or download our Valuation profile @ http://www.corporatevaluations.in/VALUATION_PROFILE.pdf
A Business Valuation Article: Relative Valuation uses the valuation ratios of Comparable publicly traded companies and applies that ratios to the comapny being valued subject to necessary adjustments.
Key Issues in Relative Valuations- a) Peer Selection, b) Current Multiples or Forward Multiples, c) Adjustments to the Value...
The 2015 budget had long list of expectations. On one hand; the Government has addressed major issues surrounding the foreign investors which would certainly boost capital market inflows and revive the private equity industry (by deferring GAAR by 2 years and clarifying Permanent Establishment & Indirect Transfer of Assets). On other hand; it has just rationalized the subsidies. Probably as we see growth coming in and more job creation; subsidy burden can be better dealt with by the Government. Though there are no direct benefits for the middle class. However incentives have been introduced to encourage savings. These savings are expected to fuel the infrastructure and other investment plans laid out by the Government. Certainly Foreign investors have a reason to cheer for this Pro Business; Pro Growth Government budget.
Mr. Chander Sawhney, Partner & Head – Valuation & Deals, Corporate Professionals shared his thoughts as a guest Speaker on M&A Valuation and challenges at a Business Valuation Masterclass organised by VC Circle on 31st August, 2016. Corporate Professionals acted as the event supporting partner.
• In case of a merger valuation, the emphasis is on arriving at the relative values of the shares of the merging companies to facilitate determination of the swap ratio, hence, the purpose is not to arrive at absolute values of the shares of the companies. The key issue to be addressed is that of fairness to all shareholders. There are established legal precedence for merger valuation methodologies:
• Valuer’s role is to incorporate case specific factors and use appropriate methodologies so as to determine a fair ratio
• Usually, best to give weight ages to valuation by all methods
• Market price method and Earnings methods dominate.
• It is observed that in case of M&A, the Valuations depart from the concept of “Fair Value” as elements like Distress Sale, Desperate Buy, Comparable Transaction Multiples come into play reflecting Price than Value.
About Corporate Professionals Valuation Practice
Corporate Professionals Capital Pvt. Ltd. is a SEBI Registered (Cat-1) Merchant Banker and has a successful track record of providing a broad range of M&A and Transaction Advisory Services. Our Dedicated Team has more than 10 years of rich Valuation experience and we have executed more than 500 Corporate Valuations for clients of International Repute across different Context, Industries and Boundaries.
To know more about Our Valuation offerings and how we can help you, please visit us at www.corporatevaluations.in or download our Valuation profile @ http://www.corporatevaluations.in/VALUATION_PROFILE.pdf
CA Varun Sethi - IndAS 102 - IFRS 2 - Share based payments - Accounting for M...Varun Sethi
Presentation by CA Varun Sethi :
Explains through flowboxes - IndAS 102 - IFRS 2 - Share based payments - especially
1. Accounting for modification or settlements of SBP and
2. SBP among group employees
Greater and better coverage, and message it carries for self learning.
Topics Covered
Overiew of Entire Model GST Law
Budget 2017 and lot more.
Happy Reading
Team GSTIndAS
Contents:
Business Valuation,
Relative valuation,
Sum of the Parts (SOTP) Valuation and Value Creation,
ESOP Valuation,
Discounted Cash Flow (DCF) Valuation,
Enterprise Valuation,
Valuation Discount Applicable to Holding Companies,
Valuation in Information Technology (IT) Sector,
RBI Valuation
Correlation of Value | Appraisal Review Practice Aid for ESOP Trustees | Merc...Mercer Capital
The correlated indication of value is a value that is arrived at through some reasonable, well-articulated, replicable, and credible process of selection, averaging or otherwise, of the total valuation evidence generated from the valuation methodologies employed.
In operation, developing a correlated indication of value may appear reasonably straightforward (sometimes it is), but the considerations in the process can reach back to the smallest of details and considerations in the underlying valuation methodologies.
In this whitepaper, Mercer Capital explores the topic of the correlation of value in ESOP valuations.
Valuation in Indian Regulatory Environment with focus on Tricky Issues: the presentation given by Mr. Chander Sawhney, Vice President (chander@indiacp.com) of Corporate Professionals at the CKF Masterclass "Corporate Valuations- Techniques and Applications"...
The recent economic growth coupled with uncertainties has resulted in the stakeholder's curiosity and interest in Valuations of their respective investee Companies and also the estimated Valuations of the Targets available for Sale which has led to a greater demand for Business Valuation services.
Since as of now there are no Regulated standards for Valuation in India, numerous conceptual controversies still remain, even among the most prominent practitioners. With a view to give an overview of the Valuation concepts in general and the practical issues in particular, www.corporatevaluations.in, an online venture of Corporate Professionals Capital, SEBI Registered Merchant Banker has prepared this report on "Insight of Valuation". Hope you find it useful. Suggestions for improvement are invited @ info@corporatevaluations.in
Corporate Valuations “Techniques & Application”: A compilation of research oriented valuation articles.
Contents: Business valuation, Relative valuation, Sum of the parts valuation and value creation, ESOP valuation, Discounted Cash Flow Valuation, Enterprise Valuation etc.
Insight of Valuation: A presentation given at Corporate Knowledge Masterclass "Corporate Valuations- Technique and Applications" at Crowne Plaza Hotel, Gurgaon, Haryana.
If any of the above conditions is not satisfied, PPE cannot be recorded.
Above recognition, the principle is to be applied to the ‘Initial’ recognition of PPE and
‘Subsequent’ recognition.
Mercer Capital | Best Practices: Fair Value ManagementMercer Capital
Topics include: Best Practices for Valuing Illiquid Portfolio Assets, Fair Value Measurement, Valuation Methods, Valuing Fund Interests, Mezzanine Loans, GIPS Valuation Hierarchy, International Private Equity and Venture Capital Valuation Guidelines (December 2012), CFA Institute Global Investment Performance Standards (2010)
The Companies Act 2013 has introduced the concept of ‘Registered Valuer’ through Section 247 Chapter XVII to cover valuation of any property, stock, shares, debentures, securities, goodwill or any other assets of the company as well as its net worth and liabilities.
Valuation team of Corporate Professionals here presents the summarized presentation on Registered Valuer.
The presentation discusses various aspects of Corporate Governance and involved issues, keeping in view the recent developments and controversies arose in conglomerates such as Tata and Infosys. It aims at portraying the extant position in filed of Corporate Governance vis-a-vis a pragmatic view of what it would be.
Takeover Panorama, a Monthly Newsletter by Corporate Professionals on Takeove...Corporate Professionals
-The brief synopsis of recent Judicial Pronouncements given by the SEBI, AO, SAT, Informal Guidance and Consent orders passed in the month of December in the matter of SEBI Takeover Regulations.
-The brief synopsis of latest Open Offers given by the National as well as International Acquirers under the SEBI Takeover Regulations
-Unhide the hidden but important provision of the SEBI Takeover Regulations which generally get unnoticed on a plain reading of the regulations.
Acquisition of stake in YourNest Angel Fund by Religare Global Asset Management
Acquisition of stake in Bokaro Jaypee Cement by Dalmia Bharat
Telstra Health Acquires Business of IdeaObject
Promulgation of SEBI (Share Based Employee Benefit) Regulations, 2014Corporate Professionals
With our endeavor to disseminate information upon the SEBI’s new Regulations, we have prepared a small presentation on Promulgation of SEBI (Share Based Employee Benefit) Regulations, 2014.
A Monthly Newsletter by Takeover Team of Corporate Professionals.
Highlights of this edition:-
SAT order in the matter of Mr. Hemant Kothari, Mr. Rajesh Kothari, Mr. Dharmendra Kothari, Mrs. Ichraj Devi Kothari and Mrs. Sunita Kothari
SAT order in the matter ofMr. Vilas Valunji, Mr. Partha Debnath,
Mr. Janardhan Shriniwas Purandare and Mr. V. A. Norhi
Consent Order in the matter of M/s. Count N Denier (India) Limited
Consent Order in the matter of M/s. Macor Packaging Limited
Exemption Order in the matter of M/s. Sarla Performance Limited
Adjudicating Officer/WTM Orders
Regular Section- Automatic Exemption from Open Offer
Legal Updates:
•SAT order in the matter of M/s. Coimbatore Flavors & Fragrances Limited, Mr. Benny Abraham and Mrs. S. Subashini
•SAT order in the matter of M/s. E-Ally Consulting (India) Private Limited, M/s. Shree Jaisal Electronics and Industries Limited and others
•SAT order in the matter of Mr. Vijay Jain, Mrs. Urvashi Jain, Mrs. Sunita Jain and others
•Consent Order in the matter of Mr. Santhosh J. Karimattom
•Consent Order in the matter of M/s.IFL Promoters Limited
•Consent order in the matter of M/s. Welspun India Limited
•Adjudicating Officer/WTM Orders
Regular Section: Open offer Escrow Account under SEBI (SAST) Regulations,2011
Highlights of IJTIB, August 2014
Toshiba to buy 26% stake in UEM India from existing shareholders
Nissan to build Micra for European market in France instead of Chennai
Mahindra Conveyor Systems group firm forms JV with Japanese Tsubaki
India’s Karbonn to make phone batteries with a Japanese researcher
Sun Pharmaceutical, with Daiichi, to tap the Japanese market
Japan may allow India to produce parts for US-2 amphibious aircraft
Ricoh seeks to double revenue from Indian market
Japan’s Keihin corp is set to develop facilities in Bangalore
India’s Suzlon in talks for Japanese offshore wind partner
Sony plans to set up a manufacturing plant in India
Toto opens its new plant in India
Amtek and Riken join hands to form 50:50 JV
With the promulgation of Companies Act, 2013, provisions governing issuance of shares by offering Stock Options to the Employees have been recognized under Section 62(1)(b) of the new Act, read with Rule 12 of Companies (Share Capital and Debentures) Rules, 2014.
Takeover Panorama: A monthly newsletter by Takeover Code Team of Corporate Professionals
Highlights of the Panorama...
1. SAT order in the matter of Ms. Sangeeta Sethia and Mr. Prabhat Sethiavs SEBI;
2. Exemption granted in the matter of M/s Prozone Capital Shopping Centres Limited;
3. Exemption granted in the matter of M/s Sibar Autoparts Limited.
4. Adjudicating Officer/WTM Orders
Risk Management Using Derivatives in Financial Planning Journal by Gaurav K B...Corporate Professionals
it is essential to identify business risks accurately and to use the right
control techniques, because derivative products can be used as insurances policies by paying
premium. An Individual/Corporate may think that they can reduce their risk, but in case of event
specific risk and unsystematic risk it’s not the same thing. Event specific risks can only be
managed by buying insurance & unsystematic risks can be managed by diversification. In this
article we'll discuss major financial risks and the way-out to use derivatives for managing those
risks. Before going to the risk management, we have to understand some of the basic concepts
of derivatives.
NEED OF BRAND VALUATION: A brand can be valued anytime and for many reasons, that includes- Brand strategy, Financial Reporting, Mergers and acquisitions, value reporting, licensing, legal transaction, accounting, strategic planning, management information, taxation planning and compliance, liquidation.
Takeover Panorama- A monthly Newsletter by TakeoverCode.com team
-Legal Update
-Hint of the Month:
-Latest Open Offers
-Case Study: SEBI’s view on the Scheme of Arrangement of M/s Aashee Infotech Limited
-Market Update
Cracking the Workplace Discipline Code Main.pptxWorkforce Group
Cultivating and maintaining discipline within teams is a critical differentiator for successful organisations.
Forward-thinking leaders and business managers understand the impact that discipline has on organisational success. A disciplined workforce operates with clarity, focus, and a shared understanding of expectations, ultimately driving better results, optimising productivity, and facilitating seamless collaboration.
Although discipline is not a one-size-fits-all approach, it can help create a work environment that encourages personal growth and accountability rather than solely relying on punitive measures.
In this deck, you will learn the significance of workplace discipline for organisational success. You’ll also learn
• Four (4) workplace discipline methods you should consider
• The best and most practical approach to implementing workplace discipline.
• Three (3) key tips to maintain a disciplined workplace.
Personal Brand Statement:
As an Army veteran dedicated to lifelong learning, I bring a disciplined, strategic mindset to my pursuits. I am constantly expanding my knowledge to innovate and lead effectively. My journey is driven by a commitment to excellence, and to make a meaningful impact in the world.
RMD24 | Debunking the non-endemic revenue myth Marvin Vacquier Droop | First ...BBPMedia1
Marvin neemt je in deze presentatie mee in de voordelen van non-endemic advertising op retail media netwerken. Hij brengt ook de uitdagingen in beeld die de markt op dit moment heeft op het gebied van retail media voor niet-leveranciers.
Retail media wordt gezien als het nieuwe advertising-medium en ook mediabureaus richten massaal retail media-afdelingen op. Merken die niet in de betreffende winkel liggen staan ook nog niet in de rij om op de retail media netwerken te adverteren. Marvin belicht de uitdagingen die er zijn om echt aansluiting te vinden op die markt van non-endemic advertising.
The world of search engine optimization (SEO) is buzzing with discussions after Google confirmed that around 2,500 leaked internal documents related to its Search feature are indeed authentic. The revelation has sparked significant concerns within the SEO community. The leaked documents were initially reported by SEO experts Rand Fishkin and Mike King, igniting widespread analysis and discourse. For More Info:- https://news.arihantwebtech.com/search-disrupted-googles-leaked-documents-rock-the-seo-world/
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
Affordable Stationery Printing Services in Jaipur | Navpack n PrintNavpack & Print
Looking for professional printing services in Jaipur? Navpack n Print offers high-quality and affordable stationery printing for all your business needs. Stand out with custom stationery designs and fast turnaround times. Contact us today for a quote!
3.0 Project 2_ Developing My Brand Identity Kit.pptxtanyjahb
A personal brand exploration presentation summarizes an individual's unique qualities and goals, covering strengths, values, passions, and target audience. It helps individuals understand what makes them stand out, their desired image, and how they aim to achieve it.
2. - Overview
- Fair Value
- Principles of Fair Value
- Fair Value Techniques
- Fair Value Hierarchy
- Application under different Ind AS
- Relative Valuation method
- Discounted Cash Flow method
Agenda – Ind AS
3. Introduction to Ind AS
Transition
to Ind AS
Advantages
of Transition
Fundamental
changes due to
Ind AS
Indian corporates are in the process of
transitioning to a new set of accounting standards
called the Indian Accounting Standards (Ind AS)
which converge closely with the International
Financial Reporting Standards (IFRS).
• Improved Comparability
• Transparency
• Qualitative Financial Statements
• Global Acceptability
Significant increase in focus on FAIR
VALUE accounting (Approx. 75% of
Balance Sheet size need Fair Value)
4. Applicability of Ind AS
Financial year Mandatorily applicable to
2016-17
Companies (listed and unlisted) whose net worth is
equal to or greater than 500 crore INR
2017-18
Unlisted companies whose net worth is equal to or
greater than 250 crore INR and all listed companies
2018-19 onwards
When a company’s net worth becomes greater than
250 crore INR
5. Ind AS using Fair Value as their guiding principle
Ind AS Description
Ind AS 113 Dedicated Standard on Fair Value Measurement
Ind AS 103 Business Combination
Ind AS 38 Intangible Assets
Ind AS 16 Property Plant & Equipment
Ind AS 36 Impairment of Assets
Ind AS 102 Share – based payment
Ind AS 109 Financial Instrument
Ind AS 40 Investment Property
7. Fair Value Definition
The PRICE that would be RECEIVED TO SELL AN ASSET or PAID TO
TRANSFER A LIABILITY in an ORDERLY TRANSACTION between
MARKET PARTICIPANTS at the MEASUREMENT DATE.
• Fair Value is a market-based measurement, NOT an entity-specific measurement
• It is measured using the assumptions that market participants would use when pricing the asset
or liability, including assumptions about risk. As a result, an entity’s intention to hold an asset or
to settle or otherwise fulfill a liability is NOT relevant when measuring fair value
8. Important considerations of Asset or Liability while
determining fair value
The Characteristics of
the Asset or Liability
Market participants
would take into
account
At
Measurement Date
Ex - The condition &
Location of the asset
Restrictions on sale or
use of the asset
9. Principal Market
or Most
Advantageous
Market
The entity must have
access to the principal (or
most advantageous)
market
The principal
market shall
be considered
from the
perspective
of the entity
The entity does not
need to be able to sell
the particular asset or
transfer particular
liability
Transaction Assumptions in Fair Value measurement
Considering all
information
reasonably
available
11. Fair Value – Use of Valuation Techniques
An entity shall use valuation techniques to measure Fair Value which is-
• For which Sufficient Data is available and
• Maximizing use of relevant Observable Inputs and
• Minimize use of Unobservable Inputs
Valuation Techniques used to measure FAIR VALUE shall be applied
consistently
Examples of Markets in which inputs might be Observable (Ex – Financial
Instruments) include Stock Exchange Markets, Dealer Markets, Brokered
Markets etc.
• Appropriate in the Circumstances and
12. Fair Value Techniques prescribed in Ind AS - 113
Market Approach
Market Approach uses prices and other relevant information generated by market
transactions involving comparable assets/liabilities/business, considering qualitative
and quantitative factors (Comparable Companies Valuation Method)
Cost Approach
Cost Approach reflects the amount that would be required currently to replace asset
(Replacement Cost method)
Income Approach
Income Approach converts future amounts to current (i.e. Discounted) amount
(ex-Cash Flows or Income and Expenses) resulting in the current market
expectations about those future amounts.
Income Approach Techniques could include-
•Present Value Techniques (Discounted Cash Flow Method)
•Option Pricing Models (Black Scholes or Binomial models)
•Multi period excess earning method (used for Intangibles)
13. Choice of Valuation Techniques
When a single valuation technique will be appropriate?
Ex - When valuing an Asset or Liability using Quoted prices in an Active market
for identical assets or liabilities
When multiple valuation techniques will be more appropriate?
Ex- When valuing a Cash generating unit
How to Conclude Value ?
If multiple valuation techniques are used to measure Fair Value, the results
shall be evaluated considering reasonableness of the range of values.
Fair Value measurement is the point within the range that is most
representative of the Fair Value in the circumstances.
14. Components of Present Value Measurement
(Discounted Cash Flow Method)
• An estimate of future cash flows for the asset/liability being measured;
• Expectations about possible variations in amount and timing of cash flows representing uncertainty
inherent in cash flows;
• Time value of money, represented by the rate on Risk Free Monetary Assets having maturity coinciding
with period of cash flows (Risk Free rate)
• Price for bearing the uncertainty inherent in cash flows (Risk Premium)
• Other factors that market participants would take (CSRP)
Notes
1. An entity shall develop unobservable inputs using best information available in circumstances. An entity
may begin with own data but shall adjust that if market participants would use different data (which is
reasonably available).
Discount rates should reflect assumptions consistent with those inherent in Cash Flows.
2. Assumptions about Cash Flows and Discount rates should be internally consistent (Nominal Cash Flows
v, Real Cash Flows, Tax adjustments etc.)
3. Discount rates should be consistent with underlying economic factors of currency in which cash flows are
denominated
15. Quoted Price -
Unadjusted
(whether that price
is directly
observable or
estimated using
another valuation
technique)
If there is principal
market for asset or
liability with
Quoted Price
Fair Value Hierarchy prescribed in Ind AS - 113
Quoted Price for
Comparable
Companies (CCM
Method)
If there is principal
market for asset or
liability but quoted
price is not
available
Unobservable Inputs shall be used, where there
is little, market activity for the asset/liability at
the measurement date. An entity may begin
with own data but shall adjust that if market
participants would use different data (which is
reasonably available).
Level -1 Level-3Level -2
Adjustments to Level-2
Inputs are permitted
including for condition
or location of Asset;
Volume of activity in
markets within which
inputs are observed
Discounted Cash Flow Method
Black Scholes or Binomial models
Other methods
16. Discounts & Premium
Depending on the Characteristics of the Assets or Liabilities that market
participants would take into account, the application of Adjustments might
be required.
These adjustments can be defined as –
1. Premium or
2. Discounts
(Ex. Control Premium or Non Controlling Interest Discount allowed)
However, Fair Value measurement shall not incorporate a Premium or
Discount that is inconsistent with the unit of account
Premium or Discounts that reflect Size as a characteristic of entity’s
holding are not permitted in a fair value measurement (Ex- a blockage
factor that adjusts the quoted price of an Asset or Liability because
market’s normal daily trading volume is not sufficient to absorb the
quantity held by the entity)
18. Ind AS 103: Business Combination
Particulars IGAAP (AS 14) Ind AS 103
Scope
• The transactions that meet the
definition of amalgamations under
the Companies Act are accounted
for in compliance with AS 14
• Goodwill arises, only if an
amalgamation is in the nature of
purchase
• If an acquirer obtains CONTROL of a business then
acquisition will be accounted as a business
combination
• Goodwill will be recognized if a business is
acquired irrespective of the legal structure of an
acquisition
(Except Common Control Acquisitions)
Initial Recognition
Assets and Liabilities reflected in the
books of the acquiree and acquired by
the acquirer will be considered while
arriving at the Goodwill
• Fair Value of the identifiable assets (tangible and
intangible) and liabilities as of the acquisition
date. PPA methodology to be followed
• Intangible will get amortized over their estimated
useful economic life which will impact the profit
and loss statement going forward
Impairment Testing Timing
Goodwill arising on amalgamation is to
be amortized over a period not
exceeding 5 years
Goodwill arising on business combination is to be
tested for impairment annually
Identifiable Assets
-
• Contingent consideration
• Contingent Assets / Liabilities
• Intangible Assets (Trademarks, Patents, Licenses)
• Non Controlling interests
19. Ind AS 16: Property Plant & Equipment (PPE)
Particulars IGAAP (AS 10) Ind AS 16
Scope
• Revaluation is permitted • One time option is given on the Transition Date to
opt for either of the two accounting models viz.
Fair Value or Cost
• PPE may be revalued at fair value periodically
• Revaluations do not affect the income statement,
but rather are recognized in equity, unless the
revaluation decreases an asset value below its net
book value
• Component approach is to be followed for
accounting of PPE
20. Ind AS 102: Share Based Payments
Particulars Guidance Note by the ICAI and SEBI
guidelines
Ind AS 102
Scope
• Option is to measure based on the
fair value or intrinsic value of the
equity instruments as on the grant
date
• Disclosure needed if fair value not
used
• Measured on grant date based on fair value only
• Fair Value should be determined based on
observable market values for identical or similar
instruments
• If observable market values are not available,
then use other estimation techniques such as
option pricing models (Black Scholes, Binomial
model)
21. Ind AS 109: Financial Instruments
Particulars IGAAP (AS 13 / 30) Ind AS 109
Scope
• Measurement is currently not
mandatory (AS 30)
• All financial instruments are initially
measured at fair value
• With deal structures becoming increasingly
more sophisticated and complex financial
instruments becoming popular, application
of Ind AS 109 will increase
Initial Recognition
• Investments are classified as long
term or current depending on
intended holding period on the
date the investment
• Long term investments are
carried at cost less provision for
permanent diminution in value
• Current investments are carried
at lower of cost and fair value
• All financial instruments are classified as
measured at amortized cost or Measured at
Fair Value
Subsequent Recognition
Measurement depends on how the financial
instrument is classified
22. Ind AS 36: Impairment of Assets
Ind AS 38: Intangible Assets (Impairment)
Particulars IGAAP (AS 28) Ind AS 38
Scope
• Applies to all assets except
inventories, assets arising from
construction contracts, deferred
tax assets, assets arising from
employee benefits, financial assets
and investments.
• Applies to all assets except inventories, assets
arising from construction contracts, deferred tax
assets, assets arising from employee benefits and
financial assets that are within the scope of Ind
AS 39.
• Applies to financial assets classified as
subsidiaries, associates and joint ventures.
Timing of Impairment Testing
Annual Impairment irrespective of
whether the impairment indicators
exits or not
•An intangible asset not yet available
for use
•An intangible asset with an estimated
useful life of more than ten years
Annual Impairment of following assets:
•An intangible asset not yet available for use
•An intangible asset with an indefinite useful life
•Goodwill acquired in a business combination
24. Pros/Cons of Different Multiples
PE Multiple
Book Value
Multiple
EV/EBITDA
Multiple
EV/Sales
Earnings : Audited Earnings (PAT)
:TTM Earnings (PAT)
Price : Latest / Volume Weighted / Simple
Average of say 6 Months
(+) Easy to apply
Net Profitability linked
(-) Prone to Accounting Adjustments
• Best multiple to apply
• Considers Operational Profits
• Not prone to Accounting Adjustments
(Depreciation & Amortizations)
• Values irrespective of Debt levels
• Book Value is the Investment (Net
Worth) that equity shareholders have
put in & earned in Company
• Not much relevant as Earnings not
factored in (other than mature cos)
(+) Simplest to apply even when in Losses
•Used to Value e-Commerce Companies /
Media Companies in Losses
(-) Not a preferred method as such, other
than for Mature Companies
26. DFCF expresses the present value of the business as a function of its future
cash earnings capacity. In this method, the appraiser estimates the cash flows of
any business after all operating expenses, taxes, and necessary investments in
working capital and capital expenditure is being met. Valuing equity using the free
cash flow to stockholders requires estimating only free cash flow to equity holders,
after debt holders have been paid off.
DFCF expresses the present value of the business as a function of its future
cash earnings capacity. In this method, the appraiser estimates the cash flows of
any business after all operating expenses, taxes, and necessary investments in
working capital and capital expenditure is being met. Valuing equity using the free
cash flow to stockholders requires estimating only free cash flow to equity holders,
after debt holders have been paid off.
Discounted Free Cash Flow Method (DFCF)
27. Understand Business Model
Identify Business Cycle
Analyze Historical Financial Performance
Review Industry and Regulatory Trends
Understand Future Growth Plans (including Capex needs)
Segregate Business and Other Cash Generating Assets
Identify Surplus Assets (assets not utilized for Business say
Land/Investments)
Create Business Projections (Profitability statement and Balance Sheets)
Discount Business Projections to Present (Explicit Period and Perpetuity)
Add Value of Surplus Assets and Subtract Value of Contingent Liabilities
DFCF Valuation Process
28. Terminal Value is calculated for the Perpetuity period based on the
Adjusted last year cash flows of the Projected period.
Free Cash Flows – Value Trend
29. Free cash flows to firm (FCFF) is calculated as
EBITDAEBITDA
Taxes
Change in Non Cash Working capital
Capital Expenditure
Free Cash
Flow to
Firm
Note that an alternate to above is following (FCFE) method in which
the value of Equity is directly valued in lieu of the value of Firm. Under
this approach, the Interest and Finance charges is also deducted to arrive at
the Free Cash Flows. Adjustment is also made for Debt (Inflows and
Outflows) over the definite period of Cash Flows and also in Perpetuity
workings.
Theoretically, the value conclusion should remain same irrespective of the
method followed (FCFF or FCFE), (Provided, assumptions are consistent).
FREE CASH FLOWS
Free Cash Flows Calculation
30. DISCOUNT RATE – WEIGHTED AVERAGE COST OF CAPITAL
Where:
D = Debt part of capital structure
E = Equity part of capital structure
Kd = Cost of Debt (Post tax)
Ke = Cost of Equity
(Kd x D) + (Ke x E)
(D + E)
In case of following FCFE, Discount Rate is Ke and Not WACC
WACC
Cost of Capital Calculation
31. DISCOUNT RATE - COST OF EQUITY
Where:
Rf = Risk free rate of return (Generally taken as 10-year Government Bond
Yield)
B = Beta Value (Sensitivity of the stock returns to market returns)
Ke = Cost of Equity
Rm= Market Rate of Return (Generally taken as Long Term average return
of
Stock Market)
SCRP = Small Company Risk Premium
CSRP= Company specific Risk premium
Mod. CAPM Model
ke = Rf + B ( Rm-Rf) + SCRP + CSRP
The Cost of Equity (Ke) is computed by using Modified Capital Asset Pricing
Model (Mod. CAPM)
Cost of Equity Calculation
32. PERPETUITY FORMULA
– Usually comprises a Large part of Total Value and is sensitive to small
changes
– Capitalizes FCF after definite forecast period as a growing perpetuity;
– Estimate Terminal Value using Terminal Value Multiplier applied on last
year cash flows
– Gordon Formula is often used to derive the Terminal Cash
Flows by applying the last year cash flows as a multiple of
the growth rate and discounting factor
– Estimated Terminal Value is then discounted to present day at company’s
cost of capital based on the discounting factor of last year projected cash
flows
(1 + g)
(WACC – g)
IMPORTANT TIP- It is advised to do Sanity check by applying Relative Valuation
Multiples to the Terminal Year Financials and also doing Scenario Analysis.
Terminal Value Calculation
33. Where Things can go Wrong
Choice of Peer
Companies
Discounts &Premiums
Cross
Holdings &
Investments
Excess Cash /
Non operating
Assets
Accounting
Practices and
Tax issues
34. We must Analyze the whole Balance Sheet and take
necessary Actions to Align them with new
Accounting requirements of Ind AS
35. Chander Sawhney
FCA, ACS, Certified Valuer (ICAI)
Partner & Head – Valuation & Deals
M: +91 9810557353; E: chander@indiacp.com
D-28, South Extension, Part-I, New Delhi-110049
www.corporatevaluations.in