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Article
Affiliation(s)

Marmara University, Istanbul, Turkey
Istanbul Aydın University, Istanbul, Turkey

ABSTRACT

Considering International Financial Reporting Standards (henceforth IFRS), although fair value is suggested in the conceptual framework and related standards, concept of measurement is used instead of concept of valuation. Determining the fair value of the acquiree specific into business combination, is needed to identify the fair value of the valuation made beyond the measurement of either monetary items or non-monetary items in the financial statements. Essential reason of the difference between acquired entity’s fair values as a basis of financial reporting standards and valuation standards, the fair value according to IFRS is equivalent to the market value according to International Valuation Standards (henceforth IVS). The fair value in accordance with IVS, the combination of the market value, and the synergistic value of the asset are subject to valuation in terms of special purchaser. When business is concerned, considering parameters such as the position in the industry, brand awareness, intellectual capital, geography, cannot be expected to be equal to the fair value of business which simply consists of market value among market participants. The ultimate aim of the study is to illustrate how to determine synergistic value in the terms of IVS which shows the difference between the market value and fair value. Based on the findings of the study, if acquired assets and liabilities are recognized in accordance with IFRS, goodwill comes out during the acquisition. Though, when fair value is determined based on IVS, goodwill is not found, even profitable business combination is realized. This is the result of considered fair value based on IVS Framework, that is the combination of market value of an asset in question and total synergistic value.

KEYWORDS

international valuation standards, international financial reporting standards, business combination, market value, fair value, synergistic value

Cite this paper

Economics World, Jan.-Feb. 2018, Vol. 6, No. 1, 49-60 doi: 10.17265/2328-7144/2018.01.006

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