Valuation date and corona

Is “Corona” to be taken into account in the company valuation?

It depends – as always – and in this case on the valuation date. An “extraordinary situation” occurred at the latest with the Federal Council’s decisions of 16 March 2020. For valuations on this or a later date, the effects of “Corona” must be fully taken into account. We have already provided information on this.

Effects discernible or not on the valuation date

For valuation dates prior to 16 March 2020, what matters is whether “Corona” and the associated effects “would have been identifiable on the valuation date … with reasonable diligence with a sufficiently high degree of probability at that time” (FM.35). “The benchmark for the scope and depth of such investigations can be the level of knowledge that would have been achievable with due diligence to be carried out on the valuation date” (Commentary FM, p. 49).

Valuation purpose decisive

Based on this principle, the purpose of the valuation is also important: In the case of an “unregulated” valuation due to entrepreneurial initiatives – e.g. purchase or sale – the price negotiations end any discussion of value. Whether and to what extent “corona” is relevant to value is decided by the parties.

In the case of “regulated”, i.e. legally required valuations, the law determines the valuation concept: If, for example, the determination of (objectified) market values is involved, this assumes a sale on the valuation date. A consideration of changes not recognisable on that day is only considered “if it is a matter of events whose root was already laid on the valuation date” (FM.36). The problem with this “root theory” is obvious, because “Corona” would also not have occurred without earlier initial infection of animals and then humans. Therefore, “cause and effect must be critically evaluated and plausibly justified in these cases” (FM.36).

Conclusion

In our view, the “extraordinary situation” is an event that cannot be foreseen on 31 December 2019 and may not be taken into account in legally required valuations on this – and an earlier – reporting date. This applies, for example, to the valuation of shares, participations and companies for accounting and taxation purposes (impairments) as well as to valuation events under inheritance and property law.