Hi great minds.
What is the appropriate way to account for repayment of principal loan and current tax payable in a DCF valuation analysis.
Cheers.
Accounting for repayment of loan principal, current tax payable in DCF valuation analysis
Re: Accounting for repayment of loan principal, current tax payable in DCF valuation analysis
Is there more than one way?
Re: Accounting for repayment of loan principal, current tax payable in DCF valuation analysis
Please expand your question, what is the context etc
Re: Accounting for repayment of loan principal, current tax payable in DCF valuation analysis
Thanks. I mean how would they be treated in deriving free cash flow in a DCF model? Would these be added, deducted or they should be ignored?
Re: Accounting for repayment of loan principal, current tax payable in DCF valuation analysis
Depends on whether you are calculating free cash flow to the firm (FCFF) or free cash flow to equity (FCFE). If the former, you should not include cash flows relating to financial obligations (such as repayment of loan principal). If the latter, you do include it.
Tax cash flows are operational cash flows and should be included in either case.
This is not an accounting/IFRS question though.
Tax cash flows are operational cash flows and should be included in either case.
This is not an accounting/IFRS question though.
Re: Accounting for repayment of loan principal, current tax payable in DCF valuation analysis
What are you valuing and for what purpose?
Re: Accounting for repayment of loan principal, current tax payable in DCF valuation analysis
Dear Marek, I want to test for goodwill impairment. I am valuing a CGU. Thank you.
Re: Accounting for repayment of loan principal, current tax payable in DCF valuation analysis
That was kind of the key information here
In general, the answer to your question is: don't include repayment of these liabilities in future cash flows
further reading:
https://ifrscommunity.com/knowledge-bas ... cash-flows
In general, the answer to your question is: don't include repayment of these liabilities in future cash flows
further reading:
https://ifrscommunity.com/knowledge-bas ... cash-flows