The reconciliation of company value under IDW S13 bridges the gap between an objectified business valuation and the actual compensation or settlement claim in family and inheritance law. Unlike a standard IDW S1 valuation, it requires adjustments for financing, deferred taxes, disposal restrictions, and inflation to ensure legally compliant and economically realistic results.
✅ For the broader framework of IDW S13, see “IDW S13 on the Valuation of Compensation Claims in Property Law Disputes.”
Financing compensation or settlement payments
In the event that there is not enough cash available to pay the compensation or settlement payments, it may be necessary to obtain financing. However, the costs associated with financing must not diminish the value of the appraisal object in question.
In practice, this situation often arises where one shareholder or spouse retains the business while compensating the other party in cash. Although external financing may be required to fund the settlement, these financing costs belong to the acquiring party and must not reduce the value of the company itself. Otherwise, the business would be undervalued merely because the purchaser requires debt financing.
Consideration of income tax effects
With regard to the treatment of income tax effects, IDW S 13 is based on the case law of the Federal Court of Justice. As part of the company valuation to determine the compensation claim in cases of gain compensation, the fiction of the sale of the assets to be valued must be assumed regardless of whether a sale is to take place.
If the (fictitious) sale results in a depreciation-related tax advantage, a so-called tax amortization benefit, this must be taken into account to increase the value. In order to maintain methodological consistency, this applies to both initial and final assets. In this context, IDW S 13 expresses the value relevance of future tax burdens in the context of company valuations. Depending on actual circumstances, the impact of deferred tax effects on the value is sometimes enormous.
This also shows the character of IDW S13 as a specification of IDW S1. The previously mentioned deferred income tax effects arise at the level of the fictitious acquirer and in connection with the imputed fiction of sale, but not in the valuation object itself.
This is one of the most significant differences between an ordinary business valuation and a valuation under IDW S13. Even where no sale is planned, the valuation assumes a hypothetical transaction. Consequently, deferred income taxes and potential tax amortization benefits become valuation-relevant because they would arise under this legal fiction. Depending on the structure of the business, these tax effects can materially increase or decrease the final compensation amount.
Share valuation in the event of restrictions on disposal
According to IDW S 13, when determining an objectified company value, the personal circumstances of the shareholder must be typified. Contractual regulations are therefore not to be included when determining an objectified company value. Contractually defined restrictions on disposal can only be taken into account in individual cases for the purpose of subjective valuation.
By way of derogation from the principle, the lower severance payment claim stipulated in the articles of association may have to be set if the termination of the business relationship had already been effective on the valuation date. According to IDW S 13, share-related disposal restrictions include substandard severance payment clauses, corporate law, contractual or de facto distribution and withdrawal restrictions, vinculation clauses and sale blocks, as well as pool contracts.
Typical examples include GmbH articles containing transfer restrictions, mandatory approval clauses (vinculation), shareholder agreements with lock-up provisions, or below-market severance clauses. IDW S13 distinguishes carefully between restrictions that influence only the subjective value for a specific shareholder and those that are relevant for determining the legally required compensation claim.
Taking into account the depreciation of money when comparing initial and final assets
IDW S 13 requires the initial and final assets to be determined on the same price basis when calculating the equalization of accrued gains. Since these values are often measured several years apart, comparing nominal values would distort the calculation. The value of the initial assets must therefore be adjusted to the purchasing-power level of the valuation date for the final assets.
In line with the case law of the German Federal Court of Justice (BGH), this adjustment is typically made using the Consumer Price Index (Verbraucherpreisindex) published by the German Federal Statistical Office (Destatis). Expressing both values on the same purchasing-power basis ensures that the comparison reflects real, rather than merely nominal, changes in wealth.
✅ For valuation-specific requirements before the reconciliation stage, see “Special Features of IDW S13 in Business Value Assessment.”
Wrap it up!
Reconciling company value under IDW S13 requires more than determining an objectified enterprise value. Financing costs, deferred income taxes resulting from the legal fiction of sale, shareholder restrictions, and inflation adjustments can all materially influence the final compensation claim. Applying these adjustments consistently ensures that business valuations comply with both IDW S13 and the relevant case law.
