--- title: "Business Valuation for Financial Reporting (IFRS/GAAP)" url: "https://legal.ge/en/service/valuation-advisory-services-en/business-valuation-for-financial-reporting-ifrs-gaap-en" field: "Valuation & Advisory Services" description: "Professional business valuation for financial reporting (IFRS/GAAP) in Georgia. Find certified valuation experts for PPA and impairment tests on Legal.ge." reviewed: "2026-06-27" updated: "2026-11-07" publisher: "legal.ge" --- # Business Valuation for Financial Reporting (IFRS/GAAP) > Source: legal.ge, https://legal.ge/en/service/valuation-advisory-services-en/business-valuation-for-financial-reporting-ifrs-gaap-en ## What is Business Valuation for Financial Reporting (IFRS/GAAP)? Business and asset valuation for financial reporting purposes is a highly regulated, precise, and specialized process aimed at determining the fair value of a company's assets and liabilities in strict compliance with International Financial Reporting Standards (IFRS) or Generally Accepted Accounting Principles (GAAP). Unlike other types of valuations (such as those for M&A or tax purposes), this process is distinguished by the fact that its results are subject to rigorous scrutiny by external auditors (including "Big Four" firms) and regulatory bodies. In Georgia, as corporate transparency standards rapidly align with European directives, the adoption of IFRS has become mandatory for large and medium-sized enterprises. This valuation ensures that the company's balance sheet reflects the true economic reality of the business, preventing any artificial inflation or deflation of asset values. This process is critically important for securing the trust of shareholders, creditors, investors, and state institutions, and for demonstrating financial stability. It requires the appraiser to possess not only advanced financial modeling skills but also a profound understanding of complex accounting standards. ## Core IFRS Valuation Categories ### What Does This Valuation Service Cover? Valuation for financial reporting encompasses a range of specific procedures and categories defined by IFRS standards. The service comprehensively covers the following areas: - **Purchase Price Allocation (PPA, IFRS 3):** When one company acquires another, IFRS 3 requires that the purchase consideration be allocated across all acquired identifiable tangible and intangible assets (such as brand, customer base, patents, technologies) at their fair value. Any difference between the purchase price and the fair value of the net assets is recorded as Goodwill. - **Impairment Testing:** Companies are required, at least annually (or whenever there is an indicator of impairment), to test goodwill and other long-lived assets. This service involves calculating the recoverable amount (Value in Use or Fair Value less costs to sell) of an asset or Cash-Generating Unit (CGU) to determine if its carrying amount exceeds its true economic value. - **Fair Value Measurement (IFRS 13):** This standard is the cornerstone for financial reporting valuations. The service includes determining the fair value of investment properties, financial instruments (IFRS 9), and biological assets from the perspective of market participants, adhering strictly to the fair value hierarchy (Levels 1, 2, 3). - **Share-based Payments (IFRS 2):** When a company compensates its employees or management with stock options, it is necessary to calculate the fair value of these options on the grant date so that they can be correctly recognized as an expense. Complex mathematical models, such as Black-Scholes or Binomial models, are used for this purpose. - **Identification and Valuation of Intangible Assets (IAS):** Determining the market value and estimating the useful economic life of internally generated or acquired intangible assets (e.g., licenses, proprietary software, trademarks). The full text is available on legal.ge after signing in: https://legal.ge/en/service/valuation-advisory-services-en/business-valuation-for-financial-reporting-ifrs-gaap-en ### Are IFRS valuations mandatory for all companies in Georgia? No, they are not mandatory for every company. According to the Georgian Law on Accounting, Reporting and Auditing, full IFRS compliance is mandatory for Public Interest Entities (PIEs), as well as Category 1 and Category 2 enterprises. Smaller entities may use IFRS for SMEs or local accounting standards, which have less stringent valuation requirements. ### What is Purchase Price Allocation (PPA) and when is it required? Purchase Price Allocation (PPA) is an accounting procedure required under IFRS 3 following a merger or acquisition. It involves allocating the purchase price of an acquired business across its identifiable tangible and intangible assets (like brands or customer lists) at their fair values, with any residual amount recorded as Goodwill. ### Can my regular accountant perform an IFRS valuation? Generally, no. IFRS valuations (especially for PPA, impairment testing, or complex financial instruments) require advanced financial modeling skills and adherence to International Valuation Standards (IVS). External auditors typically require these valuations to be performed by independent, certified valuation specialists to ensure objectivity and compliance. ### How does SARAS oversee these valuations? The Service for Accounting, Reporting and Auditing Supervision (SARAS) in Georgia regulates the quality of financial reporting and the work of auditors. If an external auditor signs off on a financial statement containing a flawed IFRS valuation, SARAS can penalize the auditor and force the company to restate its financials.