All About Valuation of Receivables Key Insights ?
Receivables form a crucial part of a company’s balance sheet, directly impacting liquidity, financial health, and business valuation. But how do we accurately determine their fair value? ?
What is Receivables Valuation?
Receivables represent amounts owed to a company, typically from customers for goods or services.
Their valuation ensures fair financial reporting and helps assess credit risk and recovery potential.
Key Considerations in Receivables Valuation
Credit Risk Assessment – Probability of default, debtor credibility, and historical payment trends.
Discounting for Present Value Future cash inflows are discounted to reflect their true economic value.
Provisioning for Doubtful Debts Expected credit loss (ECL) model under Ind AS 109 plays a critical role.
Valuation Approaches for Receivables
Historical Recovery Rate Method – Based on past collections and write-offs.
Discounted Cash Flow (DCF) Method – Used for long-term receivables with extended payment terms.
Market Benchmarking – Comparing receivables valuation with similar industry transactions.
Way Forward
Regular assessment of receivables enhances working capital efficiency.
Compliance with Ind AS 109 & IFRS 9 ensures accurate financial reporting.? Leveraging AI-driven credit analysis can improve valuation precision and risk prediction.
What’s your approach to receivables valuation? Let’s discuss!
Absolutely. We have IBBI-Registered Valuers under all three categories—Land & Building, Plant & Machinery, and Securities/Financial Assets. Our team also includes experienced chartered accountants and engineers.
Yes. We offer remote/desk-based valuation for startups, financial assets, and select use-cases. For physical assets, we usually require on-site verification.
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