- CFA Exams
- 2025 Level II
- Topic 5. Equity Valuation
- Learning Module 25. Private Company Valuation
- Subject 2. Reasons for Performing Valuations
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Subject 2. Reasons for Performing Valuations PDF Download
Private company valuations are typically performed for three different reasons.
Transaction-Related
Valuations are performed when there are transactions that affect the ownership or financing of a private company. These transactions include private financing, initial public offering (IPO), acquisition, bankruptcy, and share-based payment (compensation).
Compliance-Related
Sometimes valuations are performed for compliance purposes. An example of financial reporting valuation is the business valuation required for goodwill impairment tests. Tax related reasons for valuations include corporate and individual tax reporting.
Litigation-Related
Many legal proceedings require valuations. Examples are shareholder disputes, property damages, and divorce.
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