Valuation Interview Guide

Valuations, often referred to as valuation advisory or transaction valuation services, is an accounting and finance-related service offering performed across a wide range of contexts: M&A transactions, financial reporting (ASC 820 / IFRS 13), tax and estate planning, litigation support, restructuring, and regulatory filings. The valuations team is engaged primarily by corporate development teams, private equity and venture capital investors, lenders, public companies, and in certain cases courts and regulatory bodies to determine the economic or fair value of a business, an asset, a security, or a financial instrument. Services provided include business and asset valuation, goodwill and intangible asset impairment testing, fair value measurement for financial reporting, valuation of stock-based compensation, and contingent consideration (earn-out / CVR) valuation, among others depending on the engagement or project. When interviewing for a valuations role, it is critical to understand what valuation work is, the frameworks that drive it, and the judgment calls that separate a competent model from a defensible one.

When performing valuation work (whether for a transaction, a reporting obligation, or a tax matter) there are three critical analyses that everyone is required to understand: Business Valuation (Income, Market, and Asset-Based Approaches), Goodwill and Intangible Asset Valuation / Impairment Testing, and Fair Value Measurement / Contingent Consideration. All three analyses are compiled and put together in an Excel-based valuation model and supporting memorandum and provided to multiple parties as part of the engagement: corporate finance teams, investment bankers, private equity sponsors, auditors, lenders, and in certain cases courts and regulatory agencies. This is then compiled into a final valuation report or fair value opinion letter for the client, the client's auditors, or the relevant regulatory body.

Business Valuation — Income, Market, and Asset-Based Approaches

Business valuation is the first and most critical analysis performed as part of a valuation engagement. Whether the engagement is an M&A transaction, a financial reporting obligation, or a tax matter, the valuation team is asked to determine what a business or a specific asset is worth. Three approaches are used — the income approach (discounted cash flow), the market approach (comparable company and precedent transaction analysis), and the asset-based approach (liquidation or replacement value) — and the final opinion typically weighs all three. The primary goal is to arrive at a defensible, well-supported value that reflects the future economic benefits the asset is expected to generate, the prices the market has paid for similar assets, and the underlying asset base, respectively.

To walk through a basic example using the income approach (DCF), assume a target company has the following characteristics:

• Projected Free Cash Flows (FCF): Year 1 = $2.0M, Year 2 = $2.5M, Year 3 = $3.0M
• WACC: 10%
• Terminal Growth Rate: 3%
• Net Debt: $5.0M

The valuation is built as follows:

The $10M impairment is recorded as a non-cash charge in the income statement, reducing goodwill on the balance sheet. The critical judgment in this analysis is the fair value of the CGU, which typically relies on a DCF. The selection of the discount rate, the growth assumptions, and the selection of peer companies for the market cross-check all directly drive the impairment outcome. In summary, the goodwill and intangible asset impairment analysis is not a mechanical exercise — it is a judgment-heavy process where the assumptions chosen can swing the impairment charge by millions of dollars, and the engagement team must be prepared to defend those assumptions to the client's auditors and, in the case of public companies, to the SEC.

Fair Value Measurement & Contingent Consideration

Under ASC 820 (or IFRS 13), fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The standard establishes a three-level hierarchy of inputs:

• Level 1: Quoted prices in active markets (e.g., publicly traded stock)
• Level 2: Observable inputs other than Level 1 (e.g., interest rate curves, credit spreads)
• Level 3: Unobservable inputs (e.g., company-specific forecasts, discount rates with no market equivalent)



The majority of complex valuation work — stock-based compensation (ASC 718), contingent consideration / earn-outs (ASC 805), and fair value of complex financial instruments — falls into Level 3, which means the valuation team is building the model from scratch using the client's assumptions and market data.

To illustrate, assume a buyer acquires a target for $10M in cash plus a Contingent Value Right (CVR) that pays $1.00 for every dollar of revenue above $50M over the next three years. The target's projected revenues are:

The CVR is recorded as part of the purchase price allocation at acquisition (ASC 805), increasing the total consideration to $23.85M and driving additional goodwill. At each subsequent reporting date, the buyer must re-measure the CVR to fair value as revenue projections are updated, with changes flowing through earnings. The critical judgment here is the probability-weighted revenue forecast and the discount rate applied, both of which are Level 3 inputs. In summary, fair value measurement and contingent consideration valuation require the team to build, document, and defend Level 3 models from the ground up, and the quality of the assumption-setting is what separates a competent valuation from a defensible one.

TAS Foundations — Valuations Interview Package

We have developed and compiled a comprehensive interview guide including example case studies from valuations interviews at the largest accounting firms across the United States and Canada to support valuations candidates through the interview process. Our package includes:

• Full-length, detailed training package for DCF / Business Valuation, Goodwill & Intangible Asset Impairment Testing, and Fair Value / Contingent Consideration (ASC 820, 718, 805).
• Example Valuation Model (Excel) — DCF, impairment test, CVR / earn-out model, and comparable company analysis.
• Example Valuation Report / Fair Value Opinion Letter.
• Example Valuation Interview Case Studies — both transaction-based and financial-reporting-based.
• Complete set of potential interview questions with model answers and common follow-ups.
• Live AI Mock Interviewer

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