Startup valuation

Startup valuation

If every business starts with an idea, young companies can range the spectrum. Some are unformed, at least in a commercial sense, where the owner of the business has an idea that he or she thinks can fill an unfilled need among consumers.

Others have inched a little further up the scale and have converted the idea into a commercial product, albeit with little to show in terms of revenues or earnings. Still others have moved even further down the road to commercial success, and have a market for their product or service, with revenues and the potential, at least, for some profits.

Startup valuationSince young companies tend to be small, they represent only a small part of the overall economy. However, they tend to have a disproportionately large impact on the economy for several reasons.

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Software as a service

What is cloud computing and more specific software as a service?

Cloud computing is essentially a model for delivering information technology services in which resources are retrieved from the internet through web-based tools and applications, rather than a direct connection to a server. Data and software packages are stored in servers. Cloud computing structures allow access to information as long as an electronic device has access to the internet.

This type of system allows employees to work remotely. Cloud computing is so named because the information being accessed is found in the ‘clouds’, and does not require a user to be in a specific place to gain access to it. Companies may find that cloud computing allows them to reduce the cost of information management, since they are not required to own their own servers and can use capacity leased from third parties. Additionally, the cloud-like structure allows companies to upgrade software more quickly.

There are various types of cloud computing arrangements. Cloud services usually fall into one of three service models: infrastructure, platform and software. Here the focus is on software as a service (SaaS).

What is SaaS?

SaaS is a software distribution model in which the customer does not take possession of the supplier’s hardware andSoftware as a service application software. Instead, customers accesses the supplier’s hardware and application software from devices over the internet or via a dedicated line. In these types of arrangements, the customer does not manage or control the underlying cloud infrastructure, including the network, servers, operating systems, storage, and even individual application software capabilities, with the possible exception of limited user-specific application software configuration settings, nor is the customer responsible for upgrades to the underlying systems and software.

The key issues

In practice, it is clear that there are various application issues relating to the customer’s accounting in SaaS arrangements. These arrangements may often be bundled with other products and services, such as implementation, data migration, business process mapping, training, and project management.

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11 Best fair value measurements under IFRS 13

11 Best fair value measurements under IFRS 13 – Several IFRS standards provide guidance regarding the scope and application of for assets and liabilities. Here they are from 1 to 11…….

1 Investments in associates and joint ventures

Investments held by venture capital organizations and the like are exempt from IAS 28’s requirements … Read more

Licensing provides rights to a customer

LicensingLicensing establishes a customer’s rights to the intellectual property of an entity. Licenses of intellectual property may include, but are not limited to, licenses of any of the following:


  1. Software (other than software subject to a hosting arrangement) and technology
  2. Motion pictures, music, and other forms of media and entertainment
  3. Franchises Licensing
  4. Patents, trademarks, and copyrights. Licensing

In addition to a promise to grant a license (or licenses) to a customer, an entity may also promise to transfer other goods or services to the customer. Those promises may be explicitly stated in the contract or implied by an entity’s customary business practices, published policies, or specific statements. As with other types of contracts, when a contract with a customer includes Read more

Distinct goods or services

Distinct goods or services is a cornerstone of IFRS 15 Revenue from contracts with customers. Distinct means the customer can benefit directly from the service

Intangible assets Example

Intangible assets, other than goodwill, include expenditure on the exploration for and evaluation of oil and natural gas resources, computer software, patents, licences and trademarks and are stated at the amount initially recognized, less accumulated amortization and accumulated impairment losses.

Non-current asset

A non-current asset is an asset that is not expected to turn to cash within one year of date shown on a company's statement of financial position

Prudent reporting in high performance periods

Prudent reporting in high performance periods – This is a note on the innovative history of Philips’ financial reporting, see the ‘Introduction to a history of innovation in financial reporting‘.

As a starting point a short history of changes in the Philips’ accounting policies is provided: Prudent reporting in high performance periods

Before 1919

conservative accounting based on historical cost, write-off’s to one guilder, silent reserves, depreciation was treated as a distribution of income

1920 – 1939

a reserve for expansion was created containing money generated by additional paid-in capital (1920), in 1924 patents are capitalized

1930-1939

consolidated balance sheet (since 1931), revaluation reserve created, depreciation of capital expenditures charged to reserves

1940-1949

depreciation based on current fixed

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Intangible valuation approach

Intangible valuation approachIntangible valuation approach – Valuation assignments must estimate the value of intangibles, recognising the volatility, ongoing creation and problems with protection and enforcement. Business valuation analysts have been independently valuing intangible assets for many years, usually in the context of an exchange between owners (transaction), for estate and gift tax purposes or as part of a litigation assignment. Knowledge underlies the creation of value. Some of the questions that need to be answered include the following: