Leveraged buyout IFRS 3 best reporting

Leveraged buyout IFRS 3 best reporting – In corporate finance, a leveraged buyout (LBO) is a transaction where a company is acquired using debt as the main source of consideration. These transactions typically occur when a private equity (PE) firm borrows as much as they can from a variety of lenders (up to 70 or 80 percent of the purchase price) and funds the balance with their own equity. Leveraged buyout IFRS 3 best reporting

1 The process and business reason

The use of leverage (debt) enhances expected returns to the private equity firm. By putting in as little of their own money as possible, PE firms can achieve a large return on equity (ROE) and internal rate of return … Read more

IAS 36 How Impairment test

IAS 36 How Impairment test is all about this – When looking at the step-by-step IAS 36 impairment approach it comes down to the following broadly organised steps: IAS 36 How Impairment test

  • What?? – Determining the scope and structure of the impairment review, explained here,
  • If and when? – Determining if and when a quantitative impairment test is necessary, explained here,
  • IAS 36 How Impairment test or understanding the mechanics of the impairment test and how to recognise or reverse any impairment loss, if necessary. Which is explained in this section…

The objective of IAS 36 Impairment of assets is to outline the procedures that an entity applies to ensure that its assets’ carrying values are not … Read more

Fair value

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Market-corroborated inputs

Market-corroborated inputs are inputs to fair value calculation models that are derived principally from observable market data by correlation or other means.

Fair value hierarchy

To increase the consistency and comparability in fair value measurements, IFRS 13 (paras 72-90) established a fair value hierarchy of level 1, 2 and 3 inputs

Valuation techniques used under the three valuation approaches

Valuation techniques used under the three valuation approaches is a complete overview of valuation techniques useable under IFRS 13. The following are examples of different valuation techniques used under the three valuation approaches (Market approach, Income approach and Cost approach), and examples of common usage of those techniques.

Market approach


Examples of common usage

Quoted price in an exchange market

Equity securities, futures

Quoted prices in dealer markets

-On-the-run US Treasury notes

-To-be-announced (TBA) mortgage- backed-securities

Market multiples derived from a set of comparable assets (e.g. a price to earnings ratio expresses an entity’s per-share value in terms of its earnings per share) or transaction price paid.

Unlisted equity interestsReversal of impairment lossess

Matrix pricing

Debt securities similar to benchmark quoted

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