How important are consistent standards to the finance executives that relay on business valuations? What impact do these standards have on the trustworthiness of these valuations? Are there inconsistencies in the standards being used today? And how important is a uniform approach?
These are some of the questions put to 200 finance executives and users of business valuations in a recent academic study published in Bewertungs Praktiker.
Business valuation plays an increasingly important role in financial decision making. However, stakeholders of a valuation report frequently have fierce debates on the outcomes of the valuation, the key assumptions and the approaches chosen in the valuation process. This research study explores the role of valuation standards on valuation trustworthiness from the perspective of (finance) executives as end-users of valuation work.
The study was led by three academics, all of whom are members of the IVSC’s Europe Board. Dr Marc Broekema is Assistant Professor at the Department of Business Studies, Leiden Law School of the Leiden University; Dr Olesya Perepechko is lecturer at the Great St. Petersburg Polytechnic University; and Professor Klaus Rabel is a Professor of Business Valuation at the University of Graz.
Among the findings, the study concludes that valuation standards are perceived to be beneficial for valuation practice from the end-user’s perspective, and that valuation standards should be uniform and harmonized across the world to avoid inconsistencies in information.