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Valuation of business

Priyanka Goyal (AUDIT & TAX CONSULTANT) (117 Points)

04 October 2012

Hi!!!

I want to know why the goodwill is considered when we value the business on the basis of historical values. while it is not considered when we value the basis otherwise as economic value, value on the basis of current cost or on the basis of earning capacity.

Please Help!!!

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21 Replies

DILIP (ASSISTANT MANAGER-AUDIT) (78 Points)
Replied 04 October 2012

Could you please Precise your query.

Am unable to get what exactly your query is?

Make is easy to understand so that i can try to give answer

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DILIP (ASSISTANT MANAGER-AUDIT) (78 Points)
Replied 04 October 2012

Kindly go through the below link

https://www.caprofession.com/valuation.asp

Priyanka Goyal (AUDIT & TAX CONSULTANT) (117 Points)
Replied 04 October 2012

My query is u must have read the chapter "VALUATION OF BUSINESS". In that if you need to value the business there are so many altenatives by which you can find out the value of your business.

Historical cost basis

Economic value

Current cost basis

Earning basis.

So my question is goodwill is considered i.e. goodwill is added in historical cost of all the net assets if you need to value on historical cost basis. while it is not done in other methods why??

DILIP (ASSISTANT MANAGER-AUDIT) (78 Points)
Replied 04 October 2012

Hi,

Sorry to say that i am too confused now.

I will try to find out it and will try to update u , if i come to know.

Meanwhile go through the attachement i have attached here.

Attached File : 709840 1066021 valuation.pdf downloaded: 178 times

Priyanka Goyal (AUDIT & TAX CONSULTANT) (117 Points)
Replied 04 October 2012

I read from module only, that's why I am asking , In your attachemnt file on Page no. 9.75 see under the historical cost valuation that goodwill is asked to add . in the chapter valuation of business.

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Priyanka Goyal (AUDIT & TAX CONSULTANT) (117 Points)
Replied 04 October 2012

and I have posted some other query also in the topic share based payments, do you want to hear that??

DILIP (ASSISTANT MANAGER-AUDIT) (78 Points)
Replied 04 October 2012

Yeah with pleasure.

Do share that topic here.

Priyanka Goyal (AUDIT & TAX CONSULTANT) (117 Points)
Replied 04 October 2012

while recognizing expenses for the share based payments, when there is a change in Fair value then why the decrease is ignored and in the case of increase too only the incremental part is considered and not the revised fair value . I mean what's the logic behind that.

for eq. if the fair value considered earlier was 15 for recognition of expenses , and after that there is a reduction in exercise price ie. originally FV before reduction is 14 and after reduction it is 17 then we have to consider 15+3 ie. 18 as a FV to recognize. not the 17 why???