5.03: Valuation Dates in Valuators’ Reports

At the time a valuator’s report is requested, it is important to determine what valuation date is the most suitable. The effective valuation date will in most circumstances be different to the date on which the report is finalised.

The importance of the date is primarily linked to the fact that any events occurring after the valuation date are not relevant. The principle is that hindsight is not permitted.

Let’s say the valuator begins the work in July but the valuation date has been determined as December 31 of the previous year. The valuator needs to proceed with the exercise from the perspective prevailing at December 31. So, if, at December 31, there is no indication of the imposition of tariffs in a major customer’s country, but tariffs are in fact imposed in April, the valuator must ignore the impact of those tariffs in developing the valuation conclusion for December 31.

Business valuation is forward looking but hindsight is not permitted.

Where the report is required to help resolve a dispute, the lawyers are the most suitable persons to determine the relevant date. It may be necessary to get a court ruling on which date to use. In some cases, two valuation reports may be needed, at different dates.

In reorganizations, it will likely be the advising accountant or tax specialist who will determine the date.

If the report is required to help with a business sale or transfer to family or employees, a date as close as possible to the transfer date will be best. Allowance will need to be made for adjustments at closing.

Contact MVI or your lawyer or accountant to discuss what valuation date is the most suitable.