Home  Journals  International Accounting  40(334) - 2014 October

Comparative analysis of accounting and financial approaches to company valuation

Available online: 5 December 2014

Subject Heading: REFORM OF REPORTING

JEL Classification: 

Pages: 46-55

The value-based management is a tool that has appeared due to owners' interest. A company value is the only criterion to assess its financial health, which enables to obtain a comprehensive picture of business management effectiveness. The basis of a qualitative business valuation is information support. The world practice includes accounting and financial methods for business valuation. The applied methods aim at different evaluation criteria, information support, and have certain advantages and disadvantages. The purpose of this research is to compare different approaches to estimating the value of an enterprise, to identify the specifics of their application to improve the effectiveness of current and strategic management decisions, to determine information parameters that can be used in estimating the value of a business by various users. In the study, we applied the financial analysis method, the comparative method, as well as income and cost approaches to business valuation and compared the valuation results of Teplichnoe State Unitary Enterprise. Based on the results, we assessed the effectiveness and acceptability of practical application of accounting and financial approaches, their usefulness for the analysis of financial well-being and efficiency of business management of Teplichnoe State Unitary Enterprise. We conclude that the business valuation methods and their acceptability depend on strategic objectives of company development. The availability of a large number of information-bearing parameter requires improving the accounting and analytical support for business valuation and presenting the main evaluation indicators as a supplement to financial statements or as an element of internal reporting, depending on the interests of management.

Keywords: accounting, approach, business valuation, income, cost, comparative information-bearing parameter, business efficiency

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