Booklet on Valuation- Series 6
Booklet on Valuation: VCM ATQs on “Valuation date, Valuation report date and events between these dates” – Series 6
Valuation Date and Subsequent Events Treatment under Valuation
- Introduction
In financial economics there is a concept called efficient market hypothesis, which says that market price of an asset reflects all the available information, whether it is public or private, and as soon as a new information arrives, market price is adjusted automatically. So, it is not the event which affects value, rather it is the arrival of information about the event which affects value.
Sometimes value of some assets remains constant for a long period of time, say months or even years, because no significant information arrived during this time period. On the other hand, sometimes value changes within a day or even in a minute or few seconds. So, value is not just date specific, but it is also time specific.
If the value is connected with time, a valuer must ask himself/herself, before making any valuation, “at what point of time does s/he need the value to be computed at”? Let us call this date a “Correct Valuation Date”. This correct valuation date in-turn depends on the purpose of valuation. - Key provisions under ICAI Valuation Standards 2018
One of the key ingredients of determining fair value is the “valuation date”. It is pertinent to note that valuation is a direct correlation of a valuation date to which it is linked. Valuation is time specific and can change with the passage of time due to changes in the condition of the asset to be valued and/ or market. Accordingly, valuation of an asset as at a particular date can be different from other date(s).
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