Adopted by 100+ countries, Both IFRS and US GAAP Apply Fair Value Extensively

Our team offers extensive valuation support in assessing the fair value of businesses, intangible assets, cash-generating units and associated impairment, goodwill, and financial liabilities measured at fair value. 

We have assisted many publicly listed companies with various fair value issues under International Financial Reporting Standards (IFRS) and the United States Generally Accepted Accounting Principles (US GAAP). We have also assisted many national and international-based auditors in the context of fair value for financial reporting under IFRS and US GAAP. 

Drawing on our background as former auditors, we possess a keen understanding of the nuances among audit evidence, accounting standards, and clients' requirements. We adeptly serve as an expert for either the auditors or the companies, facilitating accurate reporting. Our proficiency in navigating intricate valuation scenarios and providing expert insights has earned us the reputation as a trusted partner with 40+ public accounting firms, ensuring compliance and fairness for auditors and public companies.

Our service includes purchase price allocation, intangible valuation, impairment testing, valuation of complex financial instruments, customized geometric brownian motion, and assistance with regulator review. We have assisted auditors and clients with OSC, CPAB, and PCAOB reviews with great results. 

Here are several types of financial reporting services explained in further detail: 

i) Purchase Price Allocation 

Purchase Price Allocation (PPA) is a systematic method of dividing the total purchase price of a business combination or asset acquisition among individual assets and liabilities acquired. These assets and liabilities may include tangible assets such as buildings, machinery, and inventory, as well as intangible assets like patents, trademarks, customer relationships, technology, and favorable/unfavorable leases. The purpose of conducting a PPA is to determine the fair value of each acquired asset and liability, as this is crucial for accurate financial reporting and compliance with the standards. 

ii) Impairment Test 

We regularly conduct impairment testing when the indicators of impairment are present. Given the current global economic landscape characterized by rising interest rates and a slowdown in the world economy, we recognize the increased significance of impairment tests, especially under IAS 36. 

Our approach involves systematic evaluations of Cash Generating Units (CGUs) to determine if the net book values on the balance sheet have exceed their value-in-use (VIU). Additionally, we draw upon market evidence to derive appropriate estimates for Fair Value Less Costs of Disposal (FVLCD). Given the susceptibility of intangible assets and goodwill to fluctuation in estimates and changing business conditions, thorough impairment testing plays a vital role in ensuring accurate financial reporting. 

iii) Complex Financial Instruments and Derivatives

We determine the fair value of complex financial instruments and derivatives by employing various methodologies, such as Monte Carlo simulations, Geometric Brownian Motion, Black Scholes, and Binomial lattice to arrive at reasonable estimates of the instruments' fair value.

a. Monte Carlo Simulations

This method relies on a "random walk" and probability distribution to project various financial scenarios. When valuing complex financial instruments and derivatives, we are able to build Monte Carlo simulations which can provide a more accurate estimate of aggregate outcome by considering the uncertainty and volatility of market variables, such as interest rates, stock prices, exchange rates, and path-dependent events. We repeat the process multiple (100,000+) times to generate a large number of possible outcomes. We then analyze the results to obtain statistical measures such as mean, standard deviation, and percentiles to understand the range of possible values. 

b. Geometric Brownian Motion (GBM)

We often build mathematical models to simulate the stochastic movement of financial assets, such as stock prices, currencies, and commodities, over time. GBM is an extension of the simple Brownian Motion model, incorporating the concept of drift and volatility, which better reflects the behavior of real financial markets. GBM provides a flexible and widely accepted framework for simulating asset price movements under uncertainty and is a fundamental building block of many quantitative finance models. Using customized GBM, we have helped clients to fair value buy-back options, redeemable and callable bonds, commodity-linked derivatives, etc.

c. Black Scholes Model

We use Black Scholes Model to value simple call and put options, and equity-based compensations (PSUs and RSUs) granted to employees. This model input includes stock price, option strike price, time to expiration, risk-free interest rate, and estimated volatility. For privately held companies, estimating the stock price and volatility may require significant professional judgment and consideration of a peer group that might materially affect the fair value of options when applying the Black-Scholes model.

iv) CBV Peer Review 

In scenarios where auditors lack an in-house Chartered Business Valuator (CBV), seeking external assurance on client-provided valuations becomes crucial. Conducting a peer review ensures accuracy, reliability, and adherence to valuation standards. Our services offer an independent and objective assessment of valuation reports prepared by other professionals. We thoroughly evaluate methodologies, assumptions, calculations, and conclusions, enhancing the quality and credibility of the valuations. This comprehensive approach strengthens the assurance process and contributes to sound financial statements.