Company Valuation Under IFRS : Interpreting and Forecasting ...

Company valuation under IFRS
For keeping abreast of research in accounting, and in particular its links to equity
valuation, the Financial analysts journal published by the CFA Institute in the US
is an excellent publication that combines academic rigour with practical
application. Subscriptions may be made through the CFA website at
www.cfainstitute.org.
Practical forecasting and valuation
The authors are not aware of a guide they can recommend that is explicitly
focused on the construction of company forecasts, though several books on
financial forecasting exist. Some of the books listed below cover both forecasting
and valuation, though they mainly focus on valuation. We recommend six books
that take rather different approaches from one another.
• Cash Flow Return on Investment: CFROI Valuation, A Total System
Approach to Valuing the Firm, B.J. Madden, Butterworth-Heinemann, 1999
• Creating Shareholder Value: A Guide for Managers and Investors, A.
Rappaport, Simon and Schuster, 1998
• Financial Statement Analysis and Security Valuation, S.H. Penman,
McGraw Hill, 2003
• Investment Valuation: Tools and Techniques for Determining the Value of
Any Asset, A. Damodaran, John Wiley, 2002
• The Quest For Value: A Guide for Senior Managers, G. Bennett Stewart,
Harper Collins, 1999
• Valuation: Measuring and Managing the Value of Companies, Copeland,
Koller, Murrin, John Wiley, 2000 (New 4th edition is due May)
Three of these books, by Rappaport, Stewart and Madden, are by senior figures
in firms that offer commercial consultancy based on one valuation approach. The
books can all be recommended as detailed expositions of the chosen approach.
More balanced in its approach to valuation is the book by Copeland et al, which
concentrates on techniques of performance appraisal, forecasting and valuation,
and continues into the realm of applying real options theory to company
valuation. It also has sections on analysis of financial companies. Penman's book
is is avowedly aimed at 'going with the grain' of accounting information, and puts
great emphasis on the importance of accruals and the interpretation of accounts.
Finally, although Damodaran's book does cover the valuation of all assets it is
predominantly a discussion of approaches to valuation models, including a very
useful discussion of the use of multiples and their relationship to intrinsic value
methodologies.
386