Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Business valuation – article issued by examiner
- This topic has 3 replies, 2 voices, and was last updated 12 years ago by John Moffat.
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- June 8, 2012 at 8:21 pm #53239
Under the report in https://www.accaglobal.com/content/dam/acca/global/PDF-students/2012s/sa_feb12_f9_valuations.pdf the examiner is claiming that using net realisable value is unfavorable, since the companies have “intangible assets such as goodwill, knowhow, brands and customer lists”. I understand the point of the examiner, however, it appears that it goes against IFRS, which do not allow recognition of mentioned items, with good reason. How do these reconcile?
Thanks!June 10, 2012 at 9:08 am #99774When valuing a business, financial accounting rules and conventions are not relevant.
Imagine you were buying a company like PricewaterhouseCoopers! The realisable value of their net assets will not be so great – but you would have to pay a lot more than this because of the goodwill. The fact that you would be buying their future income stream.
June 11, 2012 at 7:21 pm #99775Thanks John! BTW I’ve appreciated your courses a lot!
June 12, 2012 at 4:58 am #99776You are welcome (and thanks a lot).
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