Financial Analysis and Corporate Valuation - Comprehensive Workshop (5 days)

Introduction

The Financial Analysis section of the course will help participants understand and analyze the key components of financial statements – income statement / comprehensive income, balance sheet and statement of cash flows. It includes recognition and measurement of items in income statement / comprehensive income and balance sheet, review of disclosure notes and interpretation of financial statements using key ratios. The commonly used creative accounting techniques will be discussed to enable participants to evaluate the quality of financial reporting.

The second part of the course will start with an introduction to Corporate Valuation and key principles of fair value measurement. The different approaches to valuation of debt instruments will be explained including the pros and cons of each approach. The course also covers different approaches to equity valuation and looks at issues in relation to unlisted equity, application of discounted cash flow method and estimation of cost of debt and equity. Some of the difficulties of valuing companies in the current global economic conditions will be addressed. The course examines current valuation guidance and reviews the role of the International Valuation Standards Council, the IVSC.

The course is relevant to those performing valuations whatever the reason, such as tax, litigation, regulatory compliance, M&A and financial reporting.

Learning Objectives

• Apply the principles of recognition, measurement and presentation of income statement / comprehensive income and balance sheet items in IFRS
• Analyze and interpret financial statements using key ratios
• Learn the creative accounting techniques often used in financial statements and analyze its impact on quality of financial analysis
• Apply the different approaches to value debt instruments and evaluate the pros and cons of each approach
• Apply the key approaches to equity valuation and evaluate the issues in relation to unlisted equity, application of discounted cash flow method and estimation of cost of capital

Who Should Attend

• Finance department staff involved in the preparation of valuations for IFRS reporting purposes
• Regulators who analyse financial statements and valuations to ensure compliance
• Analysts who review valuations in IFRS or other accounts
• M&A teams involved in assessing acquisition or divestment opportunities
• Auditors and their valuation advisers involved in reviewing IFRS valuations
• Valuation consultants involved in valuing shares or investments in businesses for any purpose - tax, litigation, under the Articles of Association, matrimonial, M&A, financial reporting under IFRS or other GAAP

Topics

• Different accounting frameworks
  • Why Different Frameworks Exist
  • International Financial Reporting Standards (IFRS)
  • Other GAAP (Generally Accepted Accounting Practices)
• Narrative Reporting
  • What to Look For
  • How to Interpret the Information
  • Auditor’s Role
• Income Statement / Comprehensive Income Analysis
  • Accruals Concept
  • Revenue Recognition
  • Expense Recognition
  • Presentation
  • Key Performance Indicators including Earnings Per Share
  • Understanding and Interpreting Related Disclosure Notes
• Balance Sheet Analysis
  • Recognition and Measurement of
    • Tangible Fixed Assets
    • Intangible Assets
    • Financial Investments
    • Inventories
    • Accounts Receivable
    • Leases
    • Taxes
    • Financing Arrangements
    • Provisions and Contingent Liabilities
  • Presentation
  • Understanding and Interpreting Related Disclosure Notes
• Interpretation of the Statement of Cash Flows
  • Direct and Indirect Methods
  • Operating Cash Flows
  • Using the reconciliation of net profit to operating in order to identify non cash movements and judgements
  • Investing Cash Flows
  • Financing Cash Flows
  • Estimating Net Debt
• Ratio Analysis
  • Performance
  • Liquidity
  • Gearing
• Creative/Inappropriate Accounting
  • Revenue Misstatement
  • Expense Misstatement
  • Over/Undervaluing Assets
  • Not Recognizing Liabilities
  • Off-Balance Sheet Financing Opportunities
  • Presentation of One-off Gains and Losses
• Corporate valuations
  • Reasons for performing valuations
  • Tax, litigation and dispute resolution, financial reporting (IFRS), M&A, corporate recovery, Stock Exchange reporting - fairness opinions
  • Bases of value - fair value, market value, value to the owner - terminology differences
• IFRS 13, Fair Value Measurement
  • Cost, market and income approaches
  • Meaning of fair value
  • Market participants
  • Principal and most advantageous market
  • Link with International Valuation Standards Council, IVSC, guidance
  • Valuation inputs and assumptions
  • Valuation hierarchy and reliability assessment
• Valuation of Simple Debt Instruments
  • Understanding the instrument being valued
  • Market and income approaches
  • Using discounted cash flow
  • Benchmarking using credit ratings
  • Assessment of IFRS 13 hierarchy levels
• Valuation of unlisted equity - overview
  • Understanding the subject company
  • Industry and economic review
  • Performing research
  • Controlling or non-controlling holding - valuation implications
  • Equity and enterprise value
  • What is meant by a liquidity discount?
• Discounted cash flow overview
  • Cash flow forecast
  • Discount rate
  • Consistent treatment of interest and tax
  • The Gordon Growth Model
• Projecting cash flows for a DCF exercise
  • Putting together a cash flow forecast
  • Working capital requirements
  • Capital expenditure requirements
  • Risk and growth assumptions
• Cost of capital
  • Weighted average cost of capital
  • Estimating cost of debt, Kd
  • Estimating cost of equity, Ke
  • Capital Asset Pricing Model, CAPM
  • The equity risk premium
• Market approach to equity valuation - overview
  • Equity and enterprise value
  • EBIT, EBITDA multiples
  • Choice of multiples
  • Research
  • Choice of comparables and peer group
• Cost approach to valuation
  • Limited situations in which applied
  • IVSC and other guidance
  • Valuations of investment companies
  • Break-up valuations
• Drawing conclusions
  • More than one approach
  • Implied multiples from DCF valuations
  • Reverse engineering
  • Consideration of IFRS 13 disclosures required

Teaching Method

• Group live instruction in a workshop format
• PowerPoint presentations with demonstrated examples
• Numerous examples for participants to work through on their laptops
• Participant questions and group discussions on real life case studies
• All participants receive a comprehensive binder containing presentation slides
• Electronic copies of exercise and case study solutions will be available to participants

Instructors

Venue

CPE/CPD Accreditation

IASeminars is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: www.nasbaregistry.org.

 

Field of study: Accounting

Prerequisites

Basic understanding of financial statements