REV 3570 Valuation
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APPLIES TO ACADEMIC YEAR 2014/2015
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REV 3570 Valuation
Responsible for the course
Ignacio Garcia de Olalla Lopez, Sverre Dyrnes
Department
Department of Accounting - Auditing and Law
Term
According to study plan
ECTS Credits
7,5
Language of instruction
Norwegian
Introduction
Purchase price allocation in accordance with IFRS 3, impairment tests and “fair value accounting” require that an auditor possesses considerable skills in valuation.
In accordance with IFRS 3, the buyer must measure the total acquisition cost and allocate this cost to the acquired assets, both tangible and intangible, to obligations and to contingent liabilities. Under IAS 36, an entity shall conduct tests for impairment of its assets to check if the firm has incurred in impairment losses. In recent years, accounting standards have had an increasing focus on "fair value accounting".
An auditor is also often asked to help with valuations in connection with generational changes, mergers, forced redemption of shares and so forth.
This course provides students with a solid theoretical basis for conducting valuations and will engage the students in thorough discussions on how the measurements are carried out in practice.
Learning outcome
Knowledge
After completing the course, students will have acquired:
- Knowledge of the processes related to valuation
- Understanding of the different valuation models and their weaknesses and strengths
- Knowledge of how to take into account the risks and taxes in valuation
- Knowledge about the preparation of relevant forecasts to be used in valuations
- Thorough knowledge of the different situations in which the valuation is applied in the auditing process
Skills
After completing this course, students will be able to:
- Develop relevant forecasts for valuation purposes
- Determine the rate of return to calculate accounting estimates and the enterprise value
- Apply valuation models for calculating accounting estimates and the enterprise value
- Apply recognized methods for calculating the rate of return
- Analyze and use financial information to make forecasts for valuation purposes
- Have an understanding of how leverage influences the calculation of the appropriate level of equity capital.
Reflection
The students will establish a broad understanding of how various valuation models can form the basis for good decisions, and how such models can be used to support the auditing process.
Prerequisites
Recommended prerequisites are Financial Accounting and Financial Statement Analysis. Alternatively, Management Accounting and Control or equivalent.
Compulsory reading
Books:
Kaldestad, Yngve; Møller, Bjarne. 2011. Verdivurdering. Revisorforeningen.no
Recommended reading
Course outline
- Value and value components in a firm
- Forecasting of cash flows
- Cash-flow-based valuation models
- Income-based valuation models
- Valuation using multiples
- Other valuation methods
- The required rate of return
- Discounts and premiums
- Valuation of intangible assets
- Valuation for accounting purposes
Computer-based tools
It is expected that students make use of a spreadsheet program (for example Excel), and that they have access to the Internet.
Learning process and workload
The course is based on lectures, exercises, cases and hand-ins.
Recommended distribution of study time:
| Activity | Hours |
| Lectures with workshops, supervised exercises in groups | 42 |
| Work with compulsory literature, exercises, and lecture preparation | 105 |
| Hand-ins | 50 |
| Exam | 3 |
| Recommended number of hours used in this course | 200 |
Examination
The final grade for the course will be determined on the basis of the following elements and criteria:
Part 1 – A project accounting for 25 % of the final grade
The assignment may be completed individually or in groups of up to 3 students. Specific information regarding requirements for the assignment will be given in class.
Part 2 – A written exam accounting for 75 % of the final grade
The written exam is a 3-hour individual exam.
Both examination elements must be passed in order to obtain a final grade.
Examination code(s)
REV 35701 Project, accounts for 25 % of the final grade in the course REV 3570 Valuation, 7.5 credits.
REV 35702 Written exam, accounts for 75 % of the final grade in the course REV 3570 Valuation, 7.5 credits.
Examination support materials
A BI-approved exam calculator.
Examination support materials at written examiniations are explained under examination information in the student portal @BI. Please note use of calculator and dictionary. https://at.bi.no/EN/Pages/Exa_Hjelpemidler-til-eksamen.aspx
Re-sit examination
It is only possible to retake an examination when the course is next taught. The assessment in some courses is based on more than one exam code. Where this is the case, you may retake only the assessed components of these exam codes. Where this is not the case, all of the assessed components of the course must be retaken.
Additional information