IDW ES 1 n.F.: Draft introduces new valuation concepts and expanded functions for auditors

The draft of IDW ES 1 n.F. on business valuation represents a significant milestone in the development of valuation standards. Since the last revision in 2008, the economic and regulatory landscape has evolved considerably, necessitating an update to the previous regulations.

The revised draft introduces numerous changes and modernizations compared to the 2008 version. Alongside a restructuring of its layout and updates to terminology, the draft emphasizes the auditor’s accountability, particularly in distinguishing between management’s planning as a basis and the future success planning as the foundation for valuation. Depending on their role – neutral appraiser, neutral expert, or advisor – the auditor assumes varying levels of responsibility in assessing plausibility.

The concept of the objective value has been refined to focus more on plausibilized assumptions made by well-informed equity investors with purely financial objectives. Additionally, a new valuation concept, the plausibilized decision value, has been introduced, while the guidelines for determining the objective value have been made more flexible.

The draft places greater emphasis on long-term expectations, transformation processes, and the transferable earning power of a business. It also integrates existing IDW practical notes and valuation guidelines more closely, while expanding discussions on market-based valuation methods and personal income taxes.

The finalization process of IDW S 1 follows a structured approach: after the publication of the draft, a public consultation phase allows experts and Interested stakeholders to submit feedback by May 31, 2025. These comments will be reviewed by the Committee for Business Valuation and Economics (FAUB) and incorporated into revisions of the draft. Subsequently, other IDW committees, such as the Main Technical Committee (HFA) and the Corporate Reporting Committee (FAB), will review the revised text and make final adjustments. Once approved, the standard will be officially published.

With the IDW ES 1 n.F., the IDW presents a draft for the revision of one of its key standards. Given its signifi­cance for all business valuations within the scope of this standard, early engagement with the proposals and, where applicable, participation in the public consultation process is advisable – not only for auditors but also for the companies affected.