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CS Professional · Corporate Restructuring, Valuation and Insolvency · Overview of Business Valuation

A registered valuer values Ganga Pharma Ltd as of 31 December for a merger approved by the board in March. Between the valuation date and the report date, a major plant fire destroys 40% of capacity. The event was not foreseeable at the valuation date. How should the valuer treat it?

The valuer should keep the value as at the valuation date, since the fire was unforeseeable then, but disclose it as a subsequent event in the report. Adjusting the value by 40% misdates the information, while ignoring it or silently changing the date would mislead users.

  1. AValue as at the valuation date without adjusting the value, but disclose the event as a subsequent event in the reportCorrect
  2. BReduce the value by 40% as though the fire occurred before the valuation date
  3. CIgnore the event and not mention it
  4. DChange the valuation date to the report date silently

Explanation

Value is tied to the valuation date and reflects only information known or knowable then. A later unforeseeable fire should not change the value at that date, but a good valuer discloses it so users are not misled. Cutting 40% treats it as pre-existing; silence or a silent date change breaches transparency.

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