Many board members often lament that the capital markets undervalue their companies due to the lack of appreciation for their businesses. Yet in many cases, companies have not developed their own rigorous, detailed perspective on what value lies within their companies. An honest assessment of a company’s value lies at the heart of this issue.
There is an increasing use of fair value measurements in today’s financial statements, and investors are keen for such information. Unfortunately, valuation has often been an afterthought in the financial reporting process. Often, the current financial statements do not measure the true extent of a company’s assets, including its internally generated intangible assets. This is the result of accounting standards only allowing the recognition of purchased intangible assets, as there is no reliable way to value assets developed by the company itself. This has, inevitably, led to a gap in the understanding of valuation and an under appreciation of the value of a company’s assets by investors.
Valuation goes beyond purchased intangible assets. It has wide implications on the company’s financial statements, particularly in the areas of impairment assessment and recording of acquisitions or divestments. Fair value measurements require application of various valuation techniques and the use of management’s estimates and assumptions of future cash flows.
Audit Committees have the opportunity to help bridge this gap between the accounting standards and investors by tapping on the expertise of the Business Valuation profession. By actively engaging these professionals during the valuation process, Audit Committees can better highlight the hidden value of their companies and find suitable ways in which such value can be reflected in the financial statements. In doing so, Audit Committees can better reflect the value of their companies and help maximise shareholder returns.
For this AC pit stop, we brought together speakers from the United Kingdom and Southeast Asia to share with us on their expert views of Business Valuation.
CPD Hours : 2
Terms and Conditions for SID Courses/Events