"Valuation Requires Consistency Across Indicators... IMF Data Should Be Used"

KICPA Holds Valuation Forum

A recommendation has been made that valuation practices at accounting firms should ensure consistency across indicators and supplement the International Monetary Fund (IMF) forecasts with other sources when using them as medium-term projections.

The Korean Institute of Certified Public Accountants, an organization of valuation professionals, held the 10th Valuation Forum on October 8. The forum shared research findings on medium-term macroeconomic projections used to estimate future cash flows and discussed ways to support practitioners.

Professor Ahn Sunghee of the Catholic University of Korea presented findings on the use of macroeconomic projections in valuation practice, based on an analysis of public disclosure reports and a survey of accounting firms. Of the 108 reports analyzed, 75 used the discounted cash flow (DCF) method. All 75 relied on projections from a particular private information provider. Survey respondents identified consumer price inflation, nominal wage growth and gross domestic product (GDP) growth as key indicators, and emphasized the need for five-year projections, regular updates and consistency across indicators.

Professor Shin Seokha of Sookmyung Women's University proposed options for obtaining the medium-term projections needed in practice. He said that supplementing and using IMF projections could be a practical option, taking into account their credibility, accessibility and cost.

During the panel discussion that followed, Kim Jaeho, director of the Accounting Standards Department at the Korea Accounting Standards Board, said accounting standards do not require forecasts from any particular institution. He said practitioners should select forecasts suited to their purpose as of the measurement date and be able to explain their rationale. Professor Park Sungjin of Yonsei University proposed that the Korean Institute of Certified Public Accountants supplement or consolidate forecasts from domestic specialist institutions, such as the Bank of Korea, and provide them to practitioners.

Park Daejun, CEO of Samil PwC, proposed that researchers and practitioners work together to review and use a range of projections, including those from the IMF. Kang Jinhong, a partner at LeeJung Accounting Corporation, suggested that the Korean Institute of Certified Public Accountants compile relevant forecasts.

Choi Woonyeol, chairman of the Korean Institute of Certified Public Accountants, said, "Our institute has consistently supported members' valuation work by conducting research and providing practical information, including services for looking up market risk premiums and beta coefficients. We will continue our research and support to enhance expertise and reliability in the field of valuation and provide practical help to our members."

This content was produced with the assistance of AI translation services.