The Ministry of Finance is seeking comments on the draft Circular regulating Vietnamese Valuation Standards on enterprise valuation.
According to the draft, the basis of enterprise value is determined based on the valuation purpose, legal characteristics, economic -technical characteristics and market characteristics of the enterprise to be valued, the requirements of the valuation client in the valuation contract (if consistent with the valuation purpose) and relevant legal provisions. Other contents are implemented according to the provisions of the Vietnamese Valuation Standards on the basis of value.
Using Financial Statements in Business Valuation
The use of Financial Statements in enterprise valuation is based on the selected approach and method of enterprise valuation, the time of valuation and the characteristics of the enterprise to be valued. At the same time, priority is given to the use of Financial Statements that have been audited and reviewed by an independent auditing unit.
Compare and check the reasonableness of financial statements to ensure reliability. If necessary, request the appraised enterprise to adjust its financial statements and accounting books before analyzing information and applying valuation approaches and methods. In case the enterprise needs to appraise the price without adjustment, determine the difference and clearly analyze the content and basis for adjustment and clearly state it in the Valuation Report.
In case of using data from unaudited or unreviewed financial statements, or audited or reviewed financial statements with opinions other than fully acceptable opinions, this restriction must be clearly stated in the restriction section of the Certificate and Valuation Report so that the valuation client and users of the valuation results are aware.
Approaches and methods of business valuation
The application of approaches and methods for business valuation must be consistent with the basis of business value and assessment of the business's operating status at and after the time of valuation.
Market approach: The value of a business is determined by comparing the value of the business with the business to be appraised in terms of the following factors: size; main business lines; business risks, financial risks; financial indicators or successful transaction prices of the business to be appraised. The methods used in the market approach to determine the value of a business are the average ratio method and the transaction price method.
Cost Approach: The value of a business is determined through the value of the assets of the business. The method used in the cost approach to determine the value of a business is the asset approach.
Income approach: The value of a business is determined by converting the future net cash flows that can be forecasted to the valuation date. The methods used in the income approach to determine the value of a business are the free cash flow discount method, the dividend discount method and the free cash flow discount method of equity. When determining the value of a business using the income approach, it is necessary to add the value of non-operating assets at the valuation date to the discounted value of the predictable cash flows of operating assets at the valuation date. In cases where the cash flows of some operating assets cannot be reliably forecasted, the cash flows of these operating assets may not be forecasted and the value of these operating assets may be determined separately to be added to the value of the business. The dividend discount method does not add the non-operating assets of cash and cash equivalents.
Conclusion on the value of the company's equity
The equity value of a business can be determined by calculating the weighted average of the results of the applied valuation methods. The weighting for each method is based on the reliability of each method, input data information, valuation purpose... ensuring that it is suitable for the market.
Source: https://baochinhphu.vn/de-xuat-chuan-muc-tham-dinh-gia-doanh-nghiep-102240119142953063.htm
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