Module II· Valuation — Regional NotesBasic

Question

What is the difference between local GAAP and IFRS, and why does it matter for valuation?

Answer

Local GAAP

creditor-protection and prudence-driven accounting → conservative carrying values.

IFRS

an international standard, oriented toward investor information → a fair-value tendency, fewer hidden reserves.

Why it matters for valuation

EBITDA: local GAAP often lower than IFRS (provisioning treatment, IFRS 16 lease capitalization)
Net debt: IFRS pensions (DBO: defined benefit obligation) often 20–30% higher than local GAAP (market yields vs. a smoothed statutory discount rate)
Comps comparison: a mix of local-GAAP private companies vs. IFRS large-/mid-caps → you need a bridge

Application

Private middle-market companies: typically local-GAAP only
Capital-markets-oriented groups: IFRS mandatory

← PreviousHow do you defend a special-situations valuation in an interview when an MD asks 'How confident are you in this value?'Next →How does the effective corporate tax rate build up (national tax plus local business tax), and what rate do you use in a valuation?

Back to Valuation