KNAV UK

Our previous newsletters discussed various option pricing models such as the Black Scholes option pricing model and the Monte Carlo Simulation model.

This newsletter discusses practical application of the option pricing models in the field of valuation that has gained a lot of traction recently: allocation of value to multiple classes of equity shares in a company.

Read in detail here: https://knavcpa.com/allocation-of-value/

Allocation Of Value | KNAV Accounting Firm September 13, 2022Kalyani Krishnagiri0 Share Allocation Of Value 1 file(s) 434 KB Download Allocation of value UK, zLatest Publications

In the last newsletter, we discussed about the Black-Scholes-Merton model for valuing stock options. This newsletter provides insights on the application of the Monte Carlo simulation for option pricing analysis. Monte Carlo Simulation is a model used to simulate multiple outcomes for a scenario based on pre-defined inputs.

The Monte Carlo model has multiple real-life applications in virtually every field such as finance, engineering, supply chain, science etc..

Read in detail here: https://knavcpa.com/monte-carlo-simulation-3/

Monte Carlo Simulation | KNAV Accounting Firm August 12, 2022Kalyani Krishnagiri0 Share Monte Carlo Simulation 1 file(s) 454 KB Download Monte Carlo Simulation UK, zLatest Publications

Various methods can be applied when valuing stock options including the Black-Scholes-Merton model, lattice model, or a Monte-Carlo simulation. The Black-Scholes-Merton model, however, is the most generally used method.

This newsletter provides insights on the various inputs that go into using the Black-Scholes-Merton model.

Read in detail here: https://knavcpa.com/inputs-to-the-black-scholes-merton-model-a-premier-on-ifrs-2-valuation/

Inputs To The Black-Scholes-Merton Model - A Premier On IFRS 2 Valuation | KNAV Accounting Firm July 8, 2022Kalyani Krishnagiri0 Share Inputs To The Black-Scholes-Merton Model - A Premier On IFRS 2 Valuation 1 file(s) 400 KB Download INPUTS TO THE BSM MODEL UK, zLatest Publications

Impairment exists when the book value of an asset exceeds its recoverable amount. Various assets, both tangible and intangible, are required to be tested for impairment as per IAS 36 – Impairment of Assets which lays down the requirement for impairment. It provides guidance with respect to the timing & frequency of testing, measuring the recoverable amount, recognition of the loss, reversal, and disclosures related to impairment.

Impairment testing is affected by the inputs and estimates used to determine the recoverable amount and thus careful consideration of the standard is needed. This newsletter discusses the various intricacies involved in the impairment of assets.

Read in detail here: https://knavcpa.com/impairment-testing-of-assets/

Impairment Testing Of Assets | KNAV Accounting Firm June 9, 2022Kalyani Krishnagiri0 Share Impairment Testing Of Assets 1 file(s) 541 KB Download Impairment Testing of Assets - May 2022 UK, zLatest Publications

In a M&A transaction, acquirers have certain expectations on the future revenue and earnings potential of their targets. There are instances, where they also acquire the liability to service revenue for which cash has already been received. Similarly, acquirers also takeover contracts entered by the target pre-acquisition. The obligation to service the revenue recorded in the target’s books and the contracts may or may not be at market participant rates and this results in the creation of either an asset or a liability.

Deferred revenue and lease contracts are examples of such transactions, the valuations of which are discussed in this newsletter.

Read in detail here: https://knavcpa.com/fair-valuation-of-deferred-revenue-and-lease-contract/

Various intangibles need to be valued for financial reporting purposes in compliance with IFRS 3: Business Combinations. One such intangible is the Proprietary Technology owned by the company. It is a basket of intellectual property comprising of processes, tools, systems, trade secrets, and formulations that are the property of the business and provides some sort of benefit to the owner.

Valuing such an intangible can be a complex task and thus this newsletter exemplifies the various requirements, methods and assumptions that go into valuing it.

Read in detail here: https://knavcpa.com/proprietary-technology-march-2022/

Proprietary Technology – March 2022 – KNAV Accounting Firm April 11, 2022Kalyani Krishnagiri0 Share Proprietary Technology - March 2022 1 file(s) 477 KB Download Proprietary Technology March 2022 UK, zLatest Publications

The Chancellor's 2022 Spring Statement was delivered on 23rd March 2022 and contained a number of important announcements and changes for individuals and privately owned businesses.

Please find the 2022 Spring Statement for your attention detailing all of the tax changes here - https://knavcpa.com/2022-spring-statement-knav/

2022 Spring Statement – KNAV Accounting Firm April 1, 2022Kalyani Krishnagiri0 Share 2022 Spring Statement 1 file(s) 2 MB Download 2022 Spring Statement - KNAV UK, zLatest Publications

One of the most important assets of a business is its people. Generally, acquisitions make much more sense if the business continues to be operated by its key management personnel. Non-compete agreements play an important role in making acquisitions successful as the non-compete agreement ensures that the seller/key employee does not engage in any kind of direct or indirect competition with the acquirer during the specified term.

This newsletter discusses the various methods for the valuation of a non-compete agreement.

Read in detail here: https://knavcpa.com/valuation-of-non-compete-february-2022/

Valuation of Non Compete Agreement – February 2022 – KNAV Accounting Firm March 8, 2022Kalyani Krishnagiri0 Share Valuation of Non Compete Agreement - February 2022 1 file(s) 513 KB Download Valuation of Non Compete - February 22 UK, zLatest Publications

Valuation of a tradename is a process used to determine how much a company's distinguishing tradename is worth. Tradenames are used to distinguish a company's unique products and services from those of others in the marketplace.

This newsletter discusses the valuation of tradename acquired in a business combination.

Read in detail here: https://knavcpa.com/valuation-of-tradename-png/

Valuation Of Tradename – KNAV Accounting Firm February 7, 2022Kalyani Krishnagiri0 Share Valuation Of Tradename 1 file(s) 449 KB Download Valuation of Tradename UK, zLatest Publications

Customers are the driving force of any organization regardless of the sector in which it operates. Acquisition targets are often attractive on account of the customer loyalty they have built over the years as well as the data they possess about their customers.

This newsletter discusses customer-related intangible assets, the various forms in which they exist as well as the methods to value them.

Read in detail here: https://knavcpa.com/valuation-of-customer-related-intangibles/

Valuation Of Customer Related Intangibles – KNAV Accounting Firm January 7, 2022Praveen Pandey0 Share Valuation Of Customer Related Intangibles 1 file(s) 456 KB Download Valuation Of Customer Related Intangibles UK, zLatest Publications

In instances where a company cannot record the acquisition transaction before the end of the reporting period due to either a delay in receipt or unavailability of sufficient data or simple paucity of time, reporting standards allow concession to such companies for a period of one year from the date of the transaction to complete the accounting of the transaction. Any adjustments that arise based on information received post the reporting date are referred to as measurement period adjustments. However, not all information that is received can be considered for modifying the draft purchase price allocation. The reporting standards specifically allow the use of only information which existed as on the date of transaction but was quantified or discovered within the measurement period.



Our previous newsletter discussed one of the most critical accounting aspects of a business combination - Components of the Purchase Consideration. In continuance with our discussions on business combination, this newsletter discusses a few post combination accounting concepts under IFRS 3: Business Combinations.

Read in detail here: https://knavcpa.com/subsequent-accounting-in-a-business-combination-november-2021/

Subsequent Accounting In A Business Combination – November 2021 – KNAV Accounting Firm December 8, 2021Praveen Pandey0 Share Subsequent Accounting In A Business Combination - November 2021 1 file(s) 372 KB Download Subsequent accounting in a business combination - November 2021 UK, zLatest Publications

As per IFRS 3: Business Combinations, an entity is required to determine whether the transaction entered is a business combination by applying the prescribed definition in the financial reporting standard. As of the acquisition date, the acquirer shall recognize, separately from goodwill, the identifiable assets acquired, liabilities assumed, and any noncontrolling interest in the acquiree at their fair values. The goodwill is arrived at as the residual value after allocation of the fair value purchase consideration and assumed liabilities to identifiable tangible and intangible assets. Hence, a discussion on the determination of the fair value of purchase consideration is crucial to any purchase price allocation exercise.



This newsletter demonstrates and discusses various components of the purchase consideration.

Read in detail here: https://knavcpa.com/components-of-purchase-consideration/

Components Of Purchase Consideration – KNAV Accounting Firm November 11, 2021Praveen Pandey0 Share Components Of Purchase Consideration 1 file(s) 582 KB Download Components Of Purchase Consideration - October 2021 UK, zLatest Publications

Inventory is an inevitable and a significant constituent of the business assets for most entities and therefore an appropriate valuation of inventory is a must. Fair valuation of inventories is demanded under business combination transactions and financial reporting purposes, to name a few. Valuing inventories is a complex task due to the myriad of estimations involved in the process.



This newsletter exemplifies the various valuation requirements, methods, and assumptions that go into valuing inventories.

Read in detail here: https://knavcpa.com/fair-valuation-of-inventory-september-2021/

Fair Valuation Of Inventory – September 2021 – KNAV Accounting Firm September 14, 2021Praveen Pandey0 Share Fair Valuation Of Inventory – September 2021 1 file(s) 402 KB Download Fair Valuation of Inventory - UK UK, zLatest Publications

In these times where there exist a plethora of investment opportunities, private equity has gained popularity. It involves employing funds directly into private companies or engaging in buyouts of public companies resulting in a delisting. Valuation in private equity transactions is inevitable for supporting the negotiations before the investment is made and is obligatory for the periodic reporting of the performance to the investors.

Thus this newsletter entails the various techniques, assumptions, and regulatory compliance that goes into the valuation of private equity.

Click here, to read in detail: https://knavcpa.com/private-equity-valuation-2/

Private Equity – Valuation – KNAV Accounting Firm September 8, 2021Praveen Pandey0 Share Private Equity – Valuation 1 file(s) 478 KB Download Private Equity - Valuation UK, zLatest Publications

The difference in perception between the buyer and seller in relation to the target company’s post-transaction performance results in a valuation gap between the two. Contingent consideration, also known as earnouts, is used to close this gap by allowing the buyer to share the risk associated with the future of business with the seller, by making some of the consideration contingents on future performance. For a successful deal, it thus becomes crucial to recognize the implications of contingent considerations before the transaction so as to evaluate the transaction terms and support the negotiations. Various methods, requiring different inputs and assumptions are employed in the determination of the value of contingent consideration.



This thought leadership paper provides an introduction to these valuation methods.

Please click here, to read in detail: https://knavcpa.com/valuation-of-contingent-consideration-july-2021/

Synergy is the additional value that is generated by two combining firms, that create opportunities that would not have been available to these firms operating independently. It is that magic ingredient allowing acquirers to pay billions of dollars in premiums during acquisitions. Valuation of synergy is crucial for decisions regarding the consideration and viability of the business combination. By discounting the projected cash flows of the combined entity, significant value can be derived, which is then subtracted from the independent values of the business’s combining to derive the value of the synergy. The challenge in synergy valuation is a projection of reasonable business activities of the combined entity.

This thought leadership paper provides insights on the valuation of synergies.

Please click here, to read in detail: https://knavcpa.com/valuation-of-synergies/

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From a business perspective, real options apply option valuation techniques to capital budgeting decisions related to investments such as deferring, abandoning, expanding, staging, or contracting a capital investment project. The concept of a real option is crucial to the success of a business as the ability to choose the right business opportunity bears a significant effect on the company’s profitability and growth. The challenge in real options valuation is the application of an option pricing model designed for valuing financial instruments to a capital budgeting decision.

This thought leadership paper provides insights into the real options.

Please click here, to read in detail: https://knavcpa.com/valuation-update-insights-into-real-options-may-2021/

Valuation Update - Insights Into Real Options - May 2021 | KNAV Accounting Firm June 7, 2021KNAV0 Share Valuation Update - Insights Into Real Options - May 2021 1 file(s) 339.37 KB Download UK, zLatest Publications

Tax attributes are an asset of a company, just as property, plant, and equipment are assets as they offer a benefit to the company in the form of future tax liability savings. By modeling the projected utilization of a corporation’s tax attributes, significant value can be derived, which is then included in the valuation analysis.

This thought leadership paper provides insights on the impact of tax attributes related to ‘Net operating losses’ on business valuation.

Please click here, to read in detail: https://knavcpa.com/valuation-of-tax-attributes/

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Adjusting multiples for size while using the guideline public company method is a complex task faced by the valuation experts. Privately-held businesses are usually small in size in comparison to their publicly listed counterparts. Hence, it creates a need of adjusting the pricing multiples derived from multibillion-dollar companies to make them relevant for valuing a small company, even if the business descriptions are similar.

This thought leadership paper provides insights on the techniques for adjusting the market multiples for differences in size.

Please click here, to read in detail: https://knavcpa.com/size-adjustments-on-multiples/

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Discount for lack of marketability (‘DLOM’) is an important consideration in business valuation of a minority interest. The applicability of a minority discount depends on the methodology used to arrive at a base value.

This thought leadership paper provides insights on the gaining a full understanding of the concept of discount for lack of marketability and its nuances.

Read the update here : https://lnkd.in/dpWXKPU

Discount For The Lack Of Marketability - UK | KNAV Accounting Firm March 22, 2021KNAV0 Share Discount For The Lack Of Marketability - UK 1 file(s) 369.59 KB Download   UK, zLatest Publications

Control premium is an important consideration in business valuation of a controlling interest. Whether anyone will pay a premium for a controlling interest depends largely upon whether the potential buyer believes he or she can enhance the value of the company.

This thought leadership paper provides insights on the gaining a full understanding of the concept of control premium and its nuances.

Read our newsletter here- https://knavcpa.com/control-premium/

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Early stage companies are usually characterized as companies with low revenues, negative operating profits and high cash burn. They have significant milestones to overcome before becoming sustainable and cash flow positive businesses. Even those young companies that are profitable have short term histories are dependent upon external funding to continue operations. These factors and the basic fact that most early stage companies face significant survival risk makes the correct estimation of discount rates critical.

This newsletter throws some light on the approach to estimate the discount rate for early stage companies.

Read our newsletter here - https://knavcpa.com/building-a-discount-rate-for-early-stage-companies-4/

Building a Discount Rate for Early Stage Companies | KNAV Accounting Firm January 31, 2021KNAV0 Share Building a Discount Rate for Early Stage Companies 1 file(s) 438.90 KB Download   UK, zLatest Publications

In finance, beta is the degree in which the company’s equity returns vary in comparison to the overall market. It is a single measure which helps the investors to understand stock volatility in comparison to the market. The most wide use of a beta is to calculate the cost of equity using CAPM.

This thought leadership paper provides insights on these various concept of beta in valuation context.

Read it here - https://knavcpa.com/beta-an-indispensable-measure-of-security-analysis/

Beta - An Indispensable Measure Of Security Analysis | KNAV Accounting Firm November 6, 2020KNAV0 Share Beta - An Indispensable Measure Of Security Analysis 1 file(s) 391.48 KB Download   UK, zLatest Publications

Appraisers widely use WACC in financial valuation as the discount rate when calculating the present value of a business. It reflects the perceived riskiness of the cash flows. Put simply, if the value of a company equals the present value of its future free cash flows to firm, WACC is the rate we use to discount those cash flows to the present.

This thought leadership paper provides insights on the concept of WACC, how to calculate it and where to use it, with practical FAQs at the end.

Read our thought leadership here - https://knavcpa.com/building-blocks-of-wacc/

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Business support schemes for COVID-19 by the UK government

Please read the snapshot put together by KNAV UK here: https://knavcpa.com/business-support-for-covid-19/

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The Chancellor of the Exchequer presented the UK Budget to Parliament on Wednesday March 11, 2020.

KNAV has summarized the key tax changes announced in the Chancellor's speech in a document which can be downloaded here: https://knavcpa.com/uk-budget-2020/

The summary includes tables of the main rates and allowances and towards the end of the summary, you will find a calendar of the tax year with important deadline dates.