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Financial Instruments Valuation

IFRS 9, IAS 39, FASB (ASC) 825 & SFAS 133

Companies must classify measure, recognize and de-recognize financial instruments for financial reporting purposes. A financial instrument is a contract that creates a financial asset of one entity and a financial liability or equity instrument of another.  Selected examples included in the scope of IAS 39 and its replacement, IFRS 9, are debt and equity investments, loans, trade receivables and payables, qualifying provisions, net cash-settled commodity contracts, financial guarantee contracts, derivatives and convertible debt and other contracts that include embedded derivatives.

 

Measurement of these assets arise in the context of business combinations (IFRS 3, SFAS 141), hedge accounting, or in the normal course of financial reporting. 

Options may be found in a growing variety of contracts.  Companies outside of the financial services market are sometimes surprised to find that they hold derivatives. We are finding that more of our clients now hold sophisticated financial instruments such as convertibles, leases with options and other contracts with embedded derivatives. Classification of these contracts requires detailed economic analysis because the economic effects of the conditions on the reporting firm must be considered. Measurement often requires the use of valuation models.

 

American Appraisal has experience in providing independent valuation opinions for financial instruments of all levels of complexity, in accordance with the requirements of IFRS 9 or IAS 39 or ASC 825 or SFAS 133. 

 

Auditors cannot provide valuation services for the purposes of financial reporting.American Appraisal offers its clients independence, deep technical insight and a level of commitment to client satisfaction not commonly found in valuation consulting.  For more information please contact us.

 

Our Work

American Appraisal consultants, both in India and across our network of global offices, have the complex modeling skills required to value most types of financial instrument. Models that tend to be applied include:

  • Discounted Cash Flow
  • Black Scholes
  • Lattice – Binomial/ Trinomial
  • Monte Carlo

 

Recent instruments that we have valued include:

  • Fair valuation of Complex Redeemable Convertible Preference Shares
  • Valuation of Cross Currency Swaps & Exotic Investments
  • Financial Instrument Structuring and Valuation
  • Valuation of Restricted Stock
  • Valuation of embedded options (consisting of financial liability, derivative and equity)
  • Loan notes with interest paid in shares based on the future share price performance
  • Valuation of Interest Rate Swaps
  • Valuation of Debt and Warrants

 

American Appraisal consultants are active in:

  • the International Valuation Standards Council
  • the Appraisal Issues Task Force
  • the FASB’s Valuation Resources Group
  • the Appraisal Foundation
  • the American Society of Appraisers
  • the American Institute of CPAs

 

Valuations of financial instruments performed by American Appraisal result in:

  • Independent, objective and supportable market value opinions
  • Clear, comprehensive valuation reports

Please feel free to contact one of our experts to discuss your financial instruments and how they might be valued.