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CS Professional · Corporate Restructuring, Valuation and Insolvency · Valuation of Business and Assets for Corporate Restructuring

Orion Pharma Ltd. is being valued for a merger. The registered valuer applies the Asset Approach, Income Approach and Market Approach and then assigns weights to the three results to reach one value per share. Which statement best reflects accepted valuation practice under ICAI Valuation Standards and the Rules for this exercise?

The valuer may use several approaches and weight them, but must disclose the methods, assumptions and the reasons for the weights in the report. No single approach is compulsory, and the weighting is a matter of the valuer's professional judgement, not the Board's.

  1. AOnly the Asset Approach is lawful for a listed or unlisted company in a merger
  2. BThe valuer may use more than one approach, and must state the methods used and the reasons for weights in the reportCorrect
  3. CWeights can be assigned only by the Board of Directors, not the valuer
  4. DThe Market Approach must be rejected whenever the company is unlisted

Explanation

Valuation standards permit and often expect use of multiple approaches, with the valuer applying judgement and disclosing the methodology, assumptions and basis of weighting in the report. No single approach is mandated for all cases, the valuer and not the Board decides weights, and the Market Approach can use comparable companies even for unlisted entities.

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