Valuation uses the income approach (discounted cash flows), the market approach (comparable company and transaction multiples) and the cost approach. The purpose of the valuation (acquisition, financial reporting, tax, share transfer) determines the standard of value and the method to apply.
The International Valuation Standards (IVS) provide a framework for the content of valuation reports.
Related terms
Discounted cash flow (DCF)A valuation method based on discounting the free cash flows an asset or company will generate in the future to the present using an appropriate discount rate.Multiples methodEstimating value using ratios of comparable companies' market values, or of prices paid in comparable transactions, to financial indicators.Fair valueThe price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.Purchase price allocation (PPA)Allocating the consideration paid in a business combination to the identifiable assets acquired and liabilities assumed at their fair values, with the remainder determined as goodwill.Completion accountsFinancial statements prepared as at the closing date of an acquisition, through which the final price is set by net debt and working capital adjustments.Cost of capitalThe minimum rate of return investors expect from an investment in return for the risk they take.
Last updated: October 22, 2026 · This definition is for general information only.