New developments in familiar territory: Current case law on the practitioner method

From a valuation perspective, the practitioner method is the “poor relation” of business valuation. However, it is very popular in valuation practice and for tax assessments. It is therefore not surprising that the courts repeatedly have to deal with aspects of its application. This article discusses recent court rulings.

Introduction

What are the pros and cons of the practitioner method? Circular No. 28 of August 28, 2008 (KS 28) regulates the valuation of unlisted shares in corporations for wealth tax purposes. The method described therein is considered to be a written version of the practitioner method, even though it is not referred to as such anywhere in the document.

The theoretical objections to the practitioner method are not new. As early as 1946, Karl Käfer noted that “the only advantage of the method is that it saves thinking.” From a practical point of view, the simplicity and transparency of the method speak in its favor. Individual aspects – substance-related success, capital commitment, excess profits and their vulnerability to competition – are also recognized, even if their methodological link in a formula is questionable. Accordingly, professional recommendations for company valuation only allow the practitioner method “if it can be assumed that it will lead to results comparable to those obtained using business-based methods.” Nevertheless, the practitioner method is the standard procedure for tax assessments used by the tax authorities. The judgments discussed below provide guidance on its application in tax and non-tax contexts.

Read the full article from SwissAccounting|Standard 4|2025 (in German) here.