AIRA standards provide guidance for distressed business valuations
The Association of Insolvency and Restructuring Advisors (AIRA) released new standards for distressed business valuation earlier this spring, with an effective date of March 1, 2014.
Given the seemingly robust set of shared standards that exist today, what do the new AIRA valuation standards add when it comes to the valuation of distressed business interests? The answer is that the AIRA specifically identifies and addresses those issues that make the valuation of distressed interests different.
First, AIRA's valuation standards recognize that distress may not only be financial, but can also include operational, legal, regulatory and other factors. Second, they recognize that the specific nature of that distress and the legal context and intended purposes giving rise to the valuation may require significant adjustments to traditional valuation methodologies. Typical valuation adjustments may not be relevant in the case of a distressed business interest and can overstate the valuation.
Read AIRA standards provide guidance for distressed business valuations to learn more about the specific adjustments and issues, as well as why these standards matter.