Significance of IDW Standard 13 for valuation practice

In 2015, the Technical Committee for Business Valuation and Business Administration (FAUB) adopted the draft of the IDW Standard: Special features of business valuation to determine claims under family and inheritance law (IDW ES 13) and published the final version in IDW Life on June 20, 2016. IDW Standard 13 sets out the special features to be taken into account when determining claims under family and inheritance law.

With IDW Standard 13, the IDW specifies, among other things, the principles of IDW Standard 1 for specific valuation occasions. The IDW practice notes on the valuation of SMEs with regard to transferable earning power have been integrated into IDW Standard 13. In addition, IDW Standard 13 deals with the value relevance of deferred taxes. The previously valid IDW statement on business valuation in family and inheritance law (IDW St/HFA 2/1995) has been replaced by IDW Standard 13.

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Embedding in existing civil and tax law regulations

IDW Standard 13 deals with the special features of business valuation for the determination of compensation and settlement claims in the context of property disputes under family and inheritance law. In IDW Standard 13, the FAUB points out that the standard should be seen in the context of existing regulations on family and inheritance law disputes. This includes, in particular, the civil law provisions associated with claims under family and inheritance law. It is also expressly pointed out that the standard does not apply to valuations for inheritance tax purposes. Here, the relevant standards of the German Inheritance Tax Act (ErbStG) and the German Valuation Act (BewG) must be observed. With IDW Standard 13, the IDW aims to set out the auditor's methodology in the context of determining compensation or settlement claims in property disputes under family and inheritance law.

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Specification of IDW Standard 1, but no exception to IDW Standard 1

IDW Standard 13 is not an exception to IDW Standard 1. Business valuations in family and inheritance law must also be carried out in accordance with the principles of IDW Standard 1. Rather, IDW Standard 13 regulates two sets of topics: Special features in the determination of an objectified business value and special features in the reconciliation to the equalization or settlement claim.

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Special features of determining an objectified enterprise value

These include, among others:

• Two valuation dates
• Available information for valuation dates far in the past
• Method consistency in the valuation of initial and final assets
• Determination of the transferable earning power
• Determination of the imputed entrepreneurial wage

Special features of the transfer to theequalization or settlement claimThese include, among others:

• Consideration of income tax in the form of deferred taxes
• Dealing with restrictions on disposal
• Financing of compensation and settlement payments
• Consideration of monetary devaluation when comparing initial and final assets

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Wrapping it up

IDW Standard 13 provides clear guidelines for business valuation in the context of family and inheritance law. It is not an exception to IDW Standard 1, but rather specifies the valuation procedures and processes in this special area. Both the determination of the objectified business value and the reconciliation to the claim for compensation or settlement are precisely regulated. This standard helps to make valuation practice in property law disputes transparent and legally compliant. smartZebra's tools and expertise can help to make these complex processes efficient and ensure accurate valuations.

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