A client is preparing the sale of his business and want the current value to be shown on the balance sheet! We have a good idea of its worth from the offers that have been made (specialist company with minimal/no competition). Is it appropriate to revalue the shares / create goodwill or revaluation reserve / goodwill? Sorry to ask this but no matter how much I read I seem to be getting more confused!
Thanks
Andrew Nicholas
Replies (5)
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No
Under the historical cost convention it is not. You can revalue the property but not the goodwill.
The client does not understand what a balance sheet is, clearly.
I think the client is right!
The balance sheet should give an indication of the value of the business otherwise it is useless to the vast majority of users. Yes, I did spend 6 years qualifying so I understand the arguments but our clients haven't .... a point worth remembering.
To the original poster .... produce some revised accounts under a valuation basis for the purposes of the sale documentation pack.
No one is wrong here
I don't see any conflict in preparing accounts under the historical cost convention, including balance sheet, and also preparing a revised statement of assets and liabilities on a current value basis.
However, the question suggests that this might be done after the company has been offered for sale, so I'm more than a bit puzzled at the motivation to do this....