IFRS 13 identifies three widely used valuation approaches: market, income and cost. A professional valuer considers which approach fits the subject and available evidence.
01
Uses prices and other information from transactions involving comparable businesses, shares or assets.
Trading-company multiples, transaction multiples, prior financing rounds and observed market prices.
True comparability, accounting differences, growth, margins, size, geography, control and liquidity.
02
Converts expected future cash flows or earnings into present value.
Discounted cash flow, dividend discount, capitalised earnings and multi-period excess earnings.
Forecast reliability, terminal value, discount rate, working capital, capital expenditure and scenario risk.
03
Considers the current amount required to replace service capacity or the value of underlying assets and liabilities.
Adjusted net asset value, replacement cost and reproduction cost.
Unrecorded intangibles, obsolete assets, contingent liabilities and whether the business is a going concern.
Black-Scholes, binomial/lattice, Monte Carlo and probability-weighted models may be used for options, convertibles, preference shares and contingent consideration.
Scenario methods, venture capital approaches, backsolve methods and allocation models may supplement DCF or market evidence where current earnings are limited.
Multiple methods can provide useful cross-checks, but averaging weak methods does not create a strong conclusion. Weighting should reflect relevance and evidence quality, not a mechanical rule.
Further technical learning
Readers seeking a deeper technical foundation may find Professor Aswath Damodaran’s public teaching materials useful. His website includes valuation classes, lecture notes, spreadsheets, datasets and webcasts; his YouTube channel includes structured valuation playlists. These are educational resources and are not a substitute for case-specific professional advice.
This guide is educational and not legal, tax, accounting or investment advice. Requirements change; confirm the current position with the relevant adviser or authority.