Valuation of equity investments according to the new municipal financial management (NKF)
The valuation of equity investments, for purposes of commercial law, is the object of IDW’s comments on accounting: Application of the principles of the IDW S1 when valuing participations and other corporate stake holdings for the purpose of annual financial statements (IDW RS HFA 10) in conjunction with IDW S1 (Version 2008): Principles for the Performance of Business Valuations.
On the other hand, on the municipal level, participations are valued according to the new municipal financial management (NKF) and the “Gemeindehaushaltsverordnung NRW” in the following “GemHVO“.
According to § 55 VI GemHVO, equity investments are valued considering their public determination of aims. The value is determined by using the income approach or the net asset value approach. During that process it is allowed to simplify the valuation by concentrating on substantial value generating factors.
The income approach is used for market-oriented companies.
The net asset value approach is used for investments with material objectives. Local municipalities are obliged to deliver a certain public output and the value of their investments should reflect the minimum benefit for their municipality.
IVC Public Services provides services for the valuation of municipal equity investments and supports public clients in all issues regarding this topic.
Thomas Gärtner / Partner
Phone +49 (201) 31 04 83-60
send email to Thomas Gärtner
Dennis Arens / Manager
Phone +49 (201) 31 04 83-68
send email to Dennis Arens