Mercer Capital's Financial Reporting Blog

IVSC Issues Exposure Draft on Bases of Value

Levels and bases of value can be difficult to differentiate. The International Valuation Standards Council (the “IVSC”) defines a basis of value as “a statement of the fundamental measurement assumptions of a valuation.” The IVSC recently released an exposure draft discussing how the three principal bases of value interact. The IVSC is in the process of evaluating international valuation procedures and guidelines and improving the consistency and clarity of valuation procedures.

The IVSC recognizes three bases of value – market, investment, and fair value – but the relative value of each base depends on the circumstances of the transaction. For example, the investment value to the current owner of a small, family-owned business may be lower than the amount market participants would pay, having greater ability to invest and expand the operation (Market Value / IFRS 13 Fair Value). Depending on the characteristics of a transaction, valuation professionals must also consider synergies associated strategic buyers, which can sometimes reflect a premium to some of the bases of value.

Choosing the appropriate base of value is essential to developing a robust and defensible conclusion. Mercer Capital has extensive valuation experience across many different types of assignments, including fair value for financial reporting as well as fair market value for tax and corporate planning. Mercer Capital’s CEO, Chris Mercer, also currently serves on the Professional Board of the IVSC. Give us a call to discuss your next valuation need; we’re here to help.

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