Valuations and RBI guidelines are crucial for accounting for the stock market reports. The business growth depends on the valuation reports estimated by the registered valuers. There are various methodologies available in the market to calculate the valuation estimates. It is the responsibility of the valuers or consultants to choose the right methodology to estimate the valuates.
However, the Indian Corporates are in the process of implementing a new set of accounting standards called the Indian Accounting Standards (Ind AS). These standards closely merge with the International Financial Reporting Standards (IIFS). This new initiative will help create greater understandability comparability, bring in transparency in financial statements, and reach global standards. The survey states that this implementation would bring about 75% of changes and betterments in the financial reports and billing statements.
The Indian Accounting System (Ind AS) system will apply to companies with a net worth exceeding or equal to 500 crores. Ind AS valuations can also be used by all listed companies and non-listed companies with a net worth greater than or equal to 250 crores INR. Ind AS valuation helps in standing out with proper documentation, reports, and analogies used.
What are the methodologies and strategies for Ind AS Valuation?
- Ind AS Valuations services use the concept of standard.
- Valuation under Ind AS Standards uses Fair Value as their directing principle. For example, Ind AS 113 is a decent standard on fair value measurement.
- To understand Ind AS Valuation in better terms, the fair value is defined as a parameter for the ordinary transaction and not an entity-specific measurement.
- Ind AS valuation doesn't mandate an entity's intention to hold an asset. In other words, a particular entity's liabilities are not relevant when measuring the fair value.
- Ind AS Valuation includes some complex valuation models while analyzing the reports or why valuing some complex instruments or derivative principles.
The hierarchy of Fair Value determination as passed by Ind AS 113:
- Ind AS Valuation has certain degrees of determining the fair value. These are categorized into levels.
- Level 1:
- Includes some visual market inputs—for example, the market value of shares that are actively traded.
- Ind AS doesn't differentiate between the value and price if the assets are traded in the active market.
- Level 2:
- Ind AS Valuation Fair value is determined based on the value of comparable companies.
- Under the fair value calculation, adjustments are permitted conditions or location of assets.
- Level 3:
- Ind AS Valuation Fair value calculation for little or less market activity before the measurement date.
- Some methods suggested for level 3 evaluations are; Discounted cash flow method, black holes, etc.
Ind AS Valuation Practices:
- Many valuation firms are equipped with skilled, experienced, and professional Ind AS Valuation experts.
- They are trained with the required knowledge of Ind Aus Valuation Firm Value estimates and methodologies supporting the estimates.
- Various approaches govern the reachability of firm value, and Ind AS has some specified structures which are skilled by many valuation estimation firms.
- Ind AS valuation determination also follows the SEBI and Stock Exchange patterns to estimate the firm value and prepare the valuation report.
- There are various columns under Ind AS like 102, 103, etc., that have specific guidelines approaching the firm value.
Ind AS is an affirmative approach towards finding the firm value and providing a valuation estimate. The Ind AS valuation reports plays a key role in determining a stand in the financial markets. Consulting the right Ind AS consultants will get you to the right and reliable valuation reports.