Notes on Using Financial Statements for Business Valuation

According to Circular 122, when using financial statements for enterprise valuation, the following points must be noted:

- Appraisers should cross-check and verify the accuracy to ensure reliability. If necessary, appraisers should request the enterprise to adjust the financial statements and accounting books accurately before proceeding with information analysis.- When using data from unaudited financial statements, appraisers must specify this limitation in the limitations section of the Valuation Certificate and Valuation Report.- For the method based on the market approach: when using data from the enterprise's financial statements, appraisers compare to calculate indicators such as basic earnings per share, profit before tax, interest and depreciation, etc.- For the method based on the cost approach and the income approach: when using profit data from the financial statements of the most recent years of the enterprise, appraisers should consider excluding income and expenses of non-operating assets, irregular and extraordinary expenses and income.- Irregular and extraordinary expenses and income include: expenses related to enterprise restructuring, gains and losses recognized upon asset sales, changes in accounting principles, inventory write-downs, goodwill impairments, debt write-offs, etc.

Refer to related regulations at Circular 122/2017/TT-BTC effective from January 01, 2018.

- Thanh Lam -

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