Financial Reporting Valuations

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The increasing use of fair value measurement in financial reporting has raised the profile of valuations from the perspective of management, shareholders, external auditors, standard setters and regulators.

We have an experienced team of valuation professionals who specialise in valuations for financial reporting purposes using a range of valuation approaches and methodologies tailored to the specific circumstances of the valuation subject, whether it is equity, an asset or group of assets, a liability or a contingent liability.

Our team is able to undertake financial reporting valuations in compliance with a range of accounting standards, including the relevant Japanese GAAP, US GAAP and IFRS. We have extensive experience undertaking financial reporting valuations in relation to domestic and cross-border transactions.

Contact us if

  • You need to undertake a pre-deal assessment of the impact on earnings of a potential deal to support decision-making and deal communication to stakeholders.
  • You need to undertake a purchase price allocation for a recent acquisition in accordance with Japanese GAAP, IFRS or US GAAP.
  • You need advice on impairment testing to meet an annual testing requirement (i.e. for goodwill) or an ad hoc requirement when a triggering event occurs.
  • You need to value tangible assets for financial reporting (or other) purposes.
  • You are considering adopting IFRS and need advice on the fair value options available to you and on the subsequent valuation of certain assets or liabilities.
  • For financial reporting (or other) purposes, you need to assess the fair value of equity instruments (i.e. shares or share options) granted to employees or other parties.

How we can support you

Pre-deal Purchase Price Allocation (PPA)

To structure and communicate a transaction effectively and facilitate more informed decision-making by an acquiror’s board of directors, the acquiror should obtain a thorough understanding of the intangible assets being acquired and the potential impact of purchase accounting on post-deal earnings prior to the completion of a deal. Companies will be better positioned to assess the accretive or dilutive impact of a deal if a robust pre-acquisition purchase price allocation is performed during the due diligence phase of the transaction.

By integrating PwC valuation specialists into the diligence team, not only can acquirors mitigate the risk of earnings surprises, but the output of a pre-acquisition purchase price allocation can facilitate a more robust transaction valuation analysis and can easily be converted into the post-deal analysis required for financial reporting.

Purchase Price Accounting (PPA)

Increasingly complex accounting standards for reporting M&A transactions have introduced the potential for greater earnings volatility. As financial reporting moves to a fair value model, understanding financial reporting requirements and how your decisions may impact future earnings is more important than ever.

We combine valuation and accounting expertise to help you better manage the challenges of executing a deal and comply with business combinations accounting standards. Our professionals provide you with the valuation assistance and accounting guidance needed to determine your newly merged company’s opening balance sheet. We help you understand the impact on earnings and provide you with real-time advice throughout the deal process.

We have the ability to fair value most of the assets acquired and liabilities assumed in a business combination, including both tangible and intangible assets. Our valuation specialists, working alongside accounting, tax and industry specialists if necessary, have a deep understanding of the relevant reporting and regulatory requirements, and can manage the whole process, ensuring valuations are robust and meet the requirements of your auditors.

Impairment Testing

Volatile financial markets and shifting economic conditions can impact the value of a company’s assets across the balance sheet. As a result, companies are often faced with challenging decisions related to the measuring and reporting of impairment charges - inappropriate decisions can prompt unwanted scrutiny from investors, regulators and other stakeholders.

We offer a combination of valuation and accounting expertise to help you determine your approach to the impairment testing of goodwill, indefinite-lived intangible assets, long-lived tangible and intangible assets, and other assets.

We can undertake impairment tests or independently review your impairment models to help you anticipate and meet the needs of auditors, lenders, regulators and other stakeholders, and better communicate issues regarding impairment throughout the executive levels of your organization.

We also support our clients in the following areas

Tangible Asset Valuations

For entities acquiring land and buildings in a business combination or that hold investment properties and adopt the fair value model, our real estate valuation team has intimate knowledge of the Japanese real estate market and extensive real estate valuation experience across a range of asset types. Additionally, our fixed asset valuation experts can assist acquirers with the valuation of a variety of assets acquired in a business combination, such as property, plant and equipment, and can ensure that such valuations are in compliance with current accounting standards.

Valuation Upon IFRS Adoption

First time adopters of IFRS have certain choices that may result in the need for a fair value measurement. We can assist entities that wish to use the fair value of certain assets such as property, plant and equipment, investment properties or intangible assets as deemed cost on transition. Additionally, we can provide assistance to entities that entered into a business combination in the two years prior to first time adoption and which may, therefore, need to undertake an IFRS-compliant retrospective purchase price allocation and subsequent impairment testing.

Share-based Payment Valuation

We help companies meet the requirements of accounting standards in relation to share-based payment transactions, such as the issuance of employee stock options, ensuring that the effect of these transactions is correctly reflected in financial statements. For example, we undertake business valuations to meet the requirements of IFRS 2, which requires unlisted companies undertaking share-based payment transactions to reflect the effect of such transactions in their financial statements.

Valuation of Unlisted Securities

Historically, many companies have carried unlisted securities on their balance sheets at cost. Going forward, such instruments may need to be fair valued for financial reporting purposes, however challenging this may be. We help our clients develop a systematic and efficient approach to the valuation of portfolios of unlisted securities, which, when applied consistently and with sufficient rigour, results in robust valuations that meet the requirements of external auditors and other stakeholders.

Financial Instrument Valuations

The world of finance is generating increasingly sophisticated products and the demand for valuations of financial instruments such as options, warrants, convertible securities and contingencies (claims, consideration etc.) is increasing rapidly. Our experienced team has assisted clients with financial instrument valuations for transaction, financial reporting and tax purposes.

Performing and Non-Performing Loan Valuations

We help investors to evaluate loan and receivable portfolios through loan file and borrower due diligence and portfolio valuation.

 
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