Incwert provides valuations of goodwill, indefinite-lived intangibles and cash generating units for impairment testing purposes pursuant to International Accounting Standard 36 and Indian Accounting Standard (Ind AS) 36
Under Ind AS 36, Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. (reference is drawn to Ind AS 113, Fair Value Measurement.).
The standard requires annual impairment testing for intangible asset with an indefinite useful life by comparing its carrying amount with its recoverable amount. This is irrespective of whether there is any indication that it may be impaired.
Professionals at Incwert have assisted clients on several such situations and have extensive experience in valuing cash generating units and their assets for impairment testing.
Companies engaging in business combinations must navigate accounting guidelines and tax treatments, any one of which can have a profound impact on the ultimate success of a transaction.
Under Ind AS 103, an acquirer must recognize any assets acquired and liabilities assumed, and any non-controlling interest in the acquiree at the acquisition date, measured at fair value as of that date. Assets most commonly meeting the identification criteria include tangible assets, such plant & property, furniture and fixtures, and intangible assets, such as brand, customer relationships, customer list and intellectual property amongst others. Intangible assets that do not have observable inputs are typically the most challenging for companies to evaluate, but they increasingly comprise the bulk of the value acquired in today’s deals.
Other items regularly valued for allocation purposes include inventory, deferred revenue and contingent consideration.
We can help you in the following ways:
- Pre-acquisition analysis of price and assessment of potential impact on earnings
- Acquisition date fair value measurement of consideration transferred, any previously-held equity interests and any remaining non-controlling interests
- Fair valuation of tangible assets and identified intangible assets
- Valuation of derivatives and other financial instruments and their subsequent mark-to-market analysis, when required
- Fair value measurement of assumed liabilities
Accounting of financial instruments (Ind AS 32 Financial instruments: presentation, Ind AS 107 Financial instruments: disclosures, Ind AS 109 Financial instruments)
Ind AS 32 and Ind AS 109 deal with classification, recognition and measurement aspects of financial instruments. The standards require a financial instrument or its component parts to be classified by the issuer upon initial recognition as a financial liability or equity component. Example, for a compound instrument - the liability and equity are required to be accounted separately.
Under Indian accounting standards, the methods used for separating the instrument into liability and equity is as follows:
- firstly, the fair value of the liability component is calculated; this establishes the carrying amount of the liability component
- secondly, the fair value of liability component is deducted from the fair value of the instrument as a whole, the residual amount being classified as the equity component.
Compound instruments may also have embedded derivatives features which must be allocated to the liability component.
Valuing unlisted investments or instruments which do not have data from observable market can be challenging. We at Incwert have experience of carrying out such valuations and the team is capable of conducting complex valuations.