This paper aims to study the draft business valuation standard IDW ES 1 (2024) of the Institute of Public Auditors in Germany and its potential impact on legally required business valuations.
The discussion is based on a comparison of the draft standard with the previous version, with a focus on value-relevant valuation clauses. Furthermore, we analyse some of the existing case law in Germany (and partly in the UK) that addresses the issue of business valuation.
Proposed modifications to the standard mainly relate to the incorporation of future synergies into the business plan, the departure from the established key date principle and the consideration of personal income tax. While such modifications partly represent a convergence to the international practice, an existing divergence between the valuation standard and case law remains in some areas or becomes, due to a recent decision by the Federal Court of Justice, even larger.
For future case law, some of the modifications may be beneficial for minority shareholders, once the proposed guidance becomes final.
