Introduction to Valuation for Financial Reporting

BVIUK Presents: London Valuation Forum Masterclass

Introduction to Valuation for Financial Reporting Purposes

Course Overview:

This three-hour introductory masterclass (including a 15-minute mid-session break) offers valuation professionals a comprehensive foundation in Valuation for Financial Reporting (“VFR”).  Geared toward those new to VFR or seeking a refresher, the course demystifies when and why fair value measurements are needed under both International Financial Reporting Standards (“IFRS”) and FRS 102, the Financial Reporting Standard applicable in the UK and Republic of Ireland (“FRS 102”) building core competencies in applying these concepts.

Attendees will learn the key scenarios requiring valuations in financial reporting, grasp the fundamental FRS 102 and IFRS definitions of Fair Value, gain a high-level understanding of Purchase Price Allocations (PPAs), Impairment testing for Investments, goodwill and intangible assets and Share Based Payments. Emphasis is placed on practical valuation approaches and on effective collaboration with auditors to ensure valuations stand up to scrutiny.

Participants will receive a certificate of completion.

Key Topics Covered:

• When Are Valuations Required in Financial Reporting? Overview of common occasions requiring fair value measurements under both FRS 102 and  IFRS (e.g. business combinations, impairment tests, share based payments etc.) and ensuring compliance with the underlying accounting standards.

• Fair Value Concepts (FRS 102 section 2A and FRS 13): Understanding the definition of Fair Value as an exit price in an orderly transaction between market participants. Introduction to the FRS 102 / IFRS 13 framework and the market participant perspective.

• Purchase Price Allocation (PPA) Basics: High-level overview of accounting for business combinations under FRS102 section 19 and IFRS 3 - identifying and measuring tangible and intangible assets at fair value and determining goodwill. Discussion of intangibles recognised separately and how goodwill arises.

• Intangible Asset Valuation Approaches: Introduction to the three main valuation approaches - income approach, market approach, and cost approach - as applied to intangible assets. Simple examples (e.g. using discounted cash flows for the income approach, market comparables for the market approach) illustrate how to value trademarks, customer relationships, technology, and other intangibles.

• Impairment Testing Fundamentals: Basics of impairment testing under FRS 102 section 27 and IAS 36 – Consideration of impairment indicators, when and how to test Investments, goodwill and intangible assets for impairment. Understanding recoverable amount (value in use and fair value less costs of disposal) and the process to determine if an asset or Cash-Generating Unit (CGU) is impaired. Overview of goodwill impairment at a high level and intangible asset amortisation vs. impairment concepts.

• Share Based Payments, in accordance with FRS102 section 26 and IFRS2 including an overview of equity and cash settled share based payments and the impact on the financial reporting when considering the initial measurement and subsequent measurement.

• Working Effectively with Auditors: Best practices for collaborating with auditors in a financial reporting context. Learn how valuation specialists and auditors can work together to ensure valuations are well-supported and no one works in isolation. Emphasis on preparing robust documentation, addressing auditor queries on assumptions, and aligning valuation methods with accounting requirements to withstand audit scrutiny.

Learning Objectives: By the end of this masterclass, participants will be able to:

• Identify the key financial reporting scenarios that require fair value valuation analyses (such as PPAs for acquisitions and annual impairment reviews) and understand the IFRS and FRS102 mandates behind them.

• Define “Fair Value” in accordance with FRS 102 / IFRS 13 and explain its core principles and market-based measurement approach.

• Describe the purchase price allocation process, outlining how identifiable assets and liabilities are recognised at fair value and how goodwill is measured in a business combination.

• Distinguish between the income, market, and cost approaches for valuing intangible assets, and recognise when each approach is appropriate.

• Understand the fundamentals of investments, goodwill and intangible asset impairment testing – including identifying impairment indicators, determining recoverable amount, and the basics of recording an impairment loss if needed.

• Understand the fundamentals of share based payments and how these are measured for financial reporting.

• Collaborate effectively with auditors by applying best practices: providing well-documented valuation reports, justifying key assumptions, and engaging in open communication to facilitate a smooth audit review.

Instructors:

Graham Antrobus FCA, CTA, BVIUK, ASA, CBV, CVA, ABV | Bruce Sutherland & Co

Tanya Craft ACA, BVIUK | HW Fisher

This session is delivered with the support of SmartZebra, a BVIUK Partner contributing to the development of high-quality professional education within the valuation community.