IFRS valuation services
Companies rely on our expertise in financial computation for a wide range of valuations for accounting and reporting purposes. In particular, we help companies in deriving the fair value or market value of:
- Financial contracts,
- Investment instruments,
- Complex loans
- Contingent liabilities
- Credit guarantees and credit instruments, and
- Other assets or liabilities which involve some degree of uncertainty.
Most often we perform the IFRS valuations, but we also support Indian Accounting Standards (Ind AS), US GAAP and local accounting standards of several countries.
We use several types of methods in performing such valuations, depending on the nature and type of exposure being valued. Most of these valuations involve use of probability theory and cashflow discounting. In many cases we use stochastic methods, such as Monte Carlo simulation.
Some of the use cases for accounting valuations are as follows:
Fair value of financial instruments under IFRS 9
We offer services related to:
- Classification and measurement
- Impairment assessment
- Hedge accounting
Many companies have complex loan arrangements with third parties, credit guarantees, derivatives and other contracts which fall under the purview of IFRS 9. We can help carry out due diligence and advise on the appropriate treatment of such agreement under IFRS 9.
Valuation of customer loyalty programmes under IFRS 15
Companies running bonus points schemes, loyalty schemes, frequent flyer programmes or other forms of ‘points-based’ benefits to their customers need to create an appropriate provision in their financial statements. In certain cases, the liability will need to be assessed by analysing the historical customer behaviour and making assumptions about future experience. We can help companies by studying their loyalty scheme and suggesting an appropriate method for valuation of points accrued under this scheme.
Valuation of product warranties under IAS 37
Most accounting standards require that companies establish an explicit liability on their balance sheets in respect of future liability that may arise from repairing or replacing faulty products. We can help companies in valuing this liability by using actuarial techniques.
Valuation of employee benefits liabilities under IFRS 2 and IAS 19
Financial instruments, which reflect remuneration to employees, are valued under IFRS 2 instead of IFRS 9. Similarly, defined benefit plans (such as gratuity, leave encashment and pension) and flexible benefit plans are accounted under IAS 19. We have been providing valuation services under IFRS 2 and IAS 19 (and several other accounting standards) through our employee benefits practice. To learn more about actuarial valuations, click here.
Valuation of insurance contracts under IFRS 17 and IFRS 4
The International Accounting Standards Boards (IASB) issued IFRS 17 in 2017 to replace IFRS 4. Both of these accounting standards are applicable on (re)insurance companies for valuation and accounting of their (re)insurance contracts. We support companies in this area through our insurance consulting practice.