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The three valuation approaches under IVS 105

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Quick Answer

IVS 105 sets out three valuation approaches — market, income and cost — and the methods that sit beneath each.1,2

What it is

The market approach divides into the comparable companies method and the comparable transactions method; the income approach covers discounted cash flow and capitalization methods; the cost approach covers replacement, reproduction and summation. The standard's own framing is that an approach is selected for the asset and the available evidence.1,2

Operational context

What good looks like

Why It Matters

This is the frame a real valuation report and a real auditor use, and it is not the frame the education corpus teaches. Presenting DCF, comps and precedent transactions as the three methods collapses two approaches into one and drops the third entirely.1

Frequently Asked Questions

What is The three valuation approaches under IVS 105 in venture capital?

The market approach divides into the comparable companies method and the comparable transactions method; the income approach covers discounted cash flow and capitalization methods; the cost approach covers replacement, reproduction and summation.

Why is The three valuation approaches under IVS 105 important for startups?

Understanding The three valuation approaches under IVS 105 is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.

Sources & References

  1. 1.T1-08 — International Valuation Standards CouncilIVS 105 — Valuation Approaches and MethodsInternational Valuation Standards Council(IVS 105 sets out three valuation approaches — market, income and cost — and the methods that sit beneath each.)primary · T1 · valuation · concept
  2. 2.T1-09 — IVSCInternational Valuation Standards, effective 31 January 2025IVSC(IVS 105 sets out three valuation approaches — market, income and cost — and the methods that sit beneath each.)primary · T1 · valuation · concept
  3. 3.T1-10 — IVSCIVS 200 — Business and Business InterestsIVSC(IVS 105 sets out three valuation approaches — market, income and cost — and the methods that sit beneath each.)primary · T1 · valuation · concept

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