Circular No. 36/2024/TT-BTC prescribing Vietnamese valuation standards for enterprise valuation – what are the regulations?
Circular 36/2024/TT-BTC stipulates Vietnamese Valuation Standards for enterprise valuation - What does it entail?
On May 16, 2024, the Minister of Finance issued Circular 36/2024/TT-BTC regulating the Vietnamese Valuation Standards for enterprise valuation, which includes some general provisions as follows:
- Scope of Regulation
This Vietnamese Valuation Standard stipulates and guides the implementation of enterprise valuation in accordance with the provisions of the law on prices.
- Applicable Entities
+ Valuers, valuation enterprises conducting valuation service activities in accordance with the provisions of the law on prices.
+ Organizations, individuals conducting state valuation activities in accordance with the provisions of the law on prices.
+ Organizations, individuals requesting valuation, third parties using valuation reports as per valuation contracts (if any).
- Basis of Value
The basis of value for enterprise valuation is determined based on the purpose of the valuation, legal characteristics, economic-technical characteristics, and market characteristics of the enterprise to be valued, the client's requirements in the valuation contract (if appropriate with the purpose of valuation), and relevant legal provisions.
Other contents are implemented in accordance with the Vietnamese Valuation Standards on the Basis of Value for Valuation.
Circular 36/2024/TT-BTC stipulates Vietnamese Valuation Standards for enterprise valuation (Image from Internet)
How to use financial statements in enterprise valuation according to Vietnamese Valuation Standards?
According to Article 6 of the Vietnamese Valuation Standards for enterprise valuation issued with Circular 36/2024/TT-BTC, the regulation on the use of financial statements in enterprise valuation is as follows:
- The use of financial statements in enterprise valuation is based on the chosen approach, valuation method, the time of valuation, and the characteristics of the enterprise to be valued. Priority is given to using financial statements audited or reviewed by independent audit firms.
- Cross-checking and verifying the reasonableness of the financial statements to ensure reliability; if necessary, requesting the enterprise to be valued to adjust the financial figures on the financial statements before using these figures for information analysis, applying approaches, and valuation methods to serve the enterprise valuation.
If the enterprise to be valued does not adjust, determine the discrepancy and clearly analyze the content, adjustment basis, and clarify in the valuation report.
- In cases where financial data from unaudited or unreviewed financial statements are used, or audited/reviewed financial statements contain opinions other than an unqualified opinion, this limitation must be clearly stated in the limitation section of the valuation report and valuation certificate or the valuation result notification so that the individuals, organizations requesting the valuation, and individuals using the valuation results are informed.
- For valuation methods in the market approach: when using financial data from the financial statements of the enterprise to be valued, the enterprise is compared to calculate the following indicators: earnings per share (EPS), earnings before interest, taxes, depreciation, and amortization (EBITDA) for calculating market ratios for valuation purposes. Adjustments should be made to exclude income and expenses of non-operational assets, extraordinary, unusual, and irregular costs and income.
- For valuation methods in the income approach: when using profit data from the financial statements of recent years of the enterprise to be valued to forecast the enterprise's future annual income stream, adjustments should be made to exclude extraordinary, unusual, and irregular costs and income, as well as the income and expenses of non-operational assets.
- These extraordinary, unusual, and irregular costs and profits include: costs related to enterprise restructuring; gains and losses recognized from the sale of assets; changes in accounting estimates; inventory write-downs; impairment of goodwill; debt write-offs; losses or gains from court decisions; and other irregular costs and profits.
These items must be adjusted considering the impact of corporate income tax (if any).
When will Circular 36/2024/TT-BTC take effect?
According to Article 2 of Circular 36/2024/TT-BTC, the following provisions apply:
Effective Date
1. This Circular takes effect from July 1, 2024.
2. Circular No. 28/2021/TT-BTC dated April 27, 2021, of the Minister of Finance promulgating Vietnamese Valuation Standard No. 12 ceases to be effective from the effective date of this Circular.
Thus, Circular 36/2024/TT-BTC takes effect from July 1, 2024.
The Circular 36/2024/TT-BTC takes effect from July 1, 2024.
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