IDW S1: The Objectified Company Value Explained

IDW S 1 is the standard “Principles for the Performance of Business Valuations” (Grundsätze zur Durchführung von Unternehmensbewertungen) of the Institut der Wirtschaftsprüfer (IDW) in Germany. It describes how auditors determine the value of a company. It is not binding law. In practice and before German courts, however, it is the recognised yardstick.

A new version has existed since February 2026: IDW S 1 i.d.F. 2026. The previous version dated from 2008 and was the reference for almost two decades.

What a formal expert valuation delivers and when a leaner business valuation for sale and succession is sufficient can be read on our service page.

What changed with IDW S 1 i.d.F. 2026?

Capitalised earnings value and DCF remain the valuation methods; the new version sharpens above all what role the auditor takes, how deeply the planning must be assessed and which concept of value is meant.

Point	IDW S 1 i.d.F. 2026	Source
Adoption	11 February 2026 by the Technical Committee for Business Valuation and Business Administration (Fachausschuss für Unternehmensbewertung und Betriebswirtschaft, FAUB)	IDW, notice of 09.04.2026
Publication	IDW Life, issue 04/2026	IDW, notice of 09.04.2026
Retroactive application	permissible for reference dates before publication if expressly agreed in the valuation engagement	IDW, notice of 09.04.2026
Review of planning	clearer distinction between a full and a sufficient plausibility assessment of the planning	IDW, notice of 09.04.2026
Roles	Expert opinion provider (Gutachter): full, expert (Sachverständiger): sufficient, advisor (Berater): no or no sufficient plausibility assessment	Grant Thornton, 17.04.2026
Value concepts	Introduction of the “plausibility-checked decision value”, further development of the objectified value	Grant Thornton, 17.04.2026
Stock market prices	aligned with the new standard IDW S 17 on compensation based on stock market prices	IDW, notice of 09.04.2026

All sources retrieved on 24.09.2026.

For a Mittelstand owner who wants to sell, the most important change is the role logic. An auditor who “only advises” does not deliver a neutrally plausibility-checked value. Those who later want to argue with a figure against co-shareholders, heirs or the court should determine at the time of engagement in what function the auditor acts.

What IDW S 1 regulates

The standard fixes methodology and approach, not a fixed result. It defines which cash flows are relevant, how they are to be forecast and at what rate they are to be discounted. The aim is traceability: two experts working on the same engagement with the same assumptions should arrive at comparable results.

Central is the distinction by valuation purpose. IDW S 1 distinguishes whether a neutral value for third parties is required or a price limit for a specific party.

How a valuation is embedded in a sales process is described on our page on the company sale with a neutrally derived value framework.

The objectified company value

The objectified value is the core concept of IDW S 1. It is the value that the company has, on continuation of the existing concept and with the existing management, for a standardised shareholder. Personal circumstances of individual parties are left out. The value is meant to be free of one-sided interests.

That is why it is required in situations that need a neutral basis: compensation in corporate law measures, squeeze-out of minority shareholders, mergers, disputes in inheritance and family law. In these cases the value serves as a reference for an adjustment, not as a negotiating position.

The Stock Corporation Act (Aktiengesetz) describes what this value must achieve. For a domination and profit and loss transfer agreement, § 305 AktG requires adequate compensation that takes the company's asset and earnings position into account. In a squeeze-out the principal shareholder fixes the cash compensation; it must take account of the company's circumstances at the time of the general meeting's resolution (§ 327b AktG). How this is translated into figures is regulated by no statute – but in practice by IDW S 1.

Capitalised earnings value and DCF under IDW S 1

IDW S 1 recognises two equivalent methods which, with the same assumptions, lead to the same result:

The capitalised earnings method discounts the future financial surpluses flowing to the owners to the valuation date. The capitalisation rate reflects the return of a comparable alternative investment, adjusted for the risk of the company.

The DCF method (discounted cash flow) discounts cash flows, usually in the entity variant using the WACC (weighted average cost of capital). Both methods are forward-looking. The net asset value, that is, the pure sum of the assets, is not an independent value but at most a lower limit.

Multiples and other simplified price-finding are, under IDW S 1, not a valuation method of their own. They appear in the section “indications for plausibility assessments” and serve as a cross-check – more on this in the article on the multiple method.

By contrast, the simplified capitalised earnings method under the Valuation Act calculates in a much more schematic way.

The rate also decides: base rate and market risk premium 2026

Under IDW S 1 the capitalisation rate is made up of a base rate for a risk-free investment and a risk premium. The risk premium is derived from a market risk premium, for which the FAUB recommends ranges. Both quantities have recently moved.

Quantity	Value	As of	Source
Base rate under IDW S 1 (rounded)	3.75 % (unrounded 3.63 %)	01.09.2026	Kleeberg, 02.09.2026
Market risk premium before personal taxes	5.25 % to 6.75 %	FAUB resolution of 16.09.2025	IDW, 22.09.2025
Market risk premium after personal taxes	4.5 % to 5.75 %	FAUB resolution of 16.09.2025	IDW, 22.09.2025
Previous recommendation before personal taxes	6 % to 8 %	25.10.2019	IDW, 22.09.2025

Retrieved on 24.09.2026.

The FAUB lowered the market risk premium because, at the higher level of interest rates, the previous recommendation would have led to costs of capital that no longer matched observations in the capital market. At the same time the base rate has risen. Both effects run against each other.

A simplified example, for illustration only: A company earns a permanent surplus of EUR 1 million, without growth, with a beta factor of 1.0, calculated before personal taxes. With the base rate of 3.75 % and the current range, the result is a capitalisation rate of 9.0 % to 10.5 % and thus a capitalised earnings value of around EUR 9.5 to 11.1 million. With the old range of 6 % to 8 %, the rate would be 9.75 % to 11.75 % and the value around EUR 8.5 to 10.3 million.

An expert valuation under IDW S 1 calculates in more differentiated fashion – with personal taxes, company-specific beta, growth discount and detailed planning. The example only shows how sensitively the value reacts to one percentage point in the rate. More on the derivation is in the article Capitalisation rate.

Small and mid-sized companies: what IDW S 1 particularly requires

The 2008 version already devotes a separate section (8.3) to small and mid-sized companies. Three points from it are almost always relevant in the Mittelstand.

Delimitation of the valuation object. In family businesses, business and private assets are often intertwined – the hall belongs to the owner, the company car to the family. Only what passes with the company is valued.

Owner's remuneration. If the owner works in the company, an appropriate owner's remuneration is applied, as if an outside management were paid. An owner who pays himself little salary has a higher profit in the books than the company earns sustainably.

Limited sources of information. Where no robust planning exists, the valuation relies more heavily on adjusted past results and an analysis of earning power.

For owners who plan their business succession in Germany with a robust company value, these three points are usually more important than the question of whether capitalised earnings value or DCF is calculated.

Objectified value and decision value compared

The objectified value is not the only concept of value. Opposite it stands the subjective decision value.

Feature	Objectified value	Subjective decision value
Perspective	Standardised, neutral shareholder	Specific party (buyer or seller)
Takes individual effects into account	No	Yes (financing, taxes, own effects)
Function	Neutral reference, adjustment	Price ceiling or floor
Typical occasion	Squeeze-out, compensation, dispute	Purchase, sale, negotiation

For a transaction the decision value counts, not the objectified value. Those who sell want to know what a particular buyer can pay at most. The 2026 version additionally introduces for this the concept of the “plausibility-checked decision value” (Grant Thornton, 17.04.2026).

The new version also becomes more concrete on synergies. They are to be assessed in the individual case; the yardstick is what a fully informed equity investor would expect, without all conceivable synergies having to be recognised (Grant Thornton, 17.04.2026). For sellers this means: the synergies of a strategic buyer do not automatically flow into an objectified value – they are bargaining material.

How this framework can be formed in the case of a sale is covered in the article what is my company worth.

The Austrian view: KFS/BW 1

The counterpart to IDW S 1 in Austria is the expert opinion KFS/BW 1 of the Chamber of Tax Advisors and Auditors (Kammer der Steuerberater und Wirtschaftsprüfer). It follows the same basic logic: forward orientation, capitalised earnings value and DCF, an objectified value as a neutral yardstick.

A current change should be noted. The new version KFS/BW 1 (2025) was adopted on 6 November 2025 and is binding for engagements accepted from 30 June 2026; what is decisive is the acceptance of the engagement, not the valuation date (LeitnerLeitner, 17.02.2026; TPA, 27.05.2026). New is that, besides the objectified value and the arbitration value (Schiedswert), two further measures of value were introduced: the market value and the standardised subjective company value. For the market value, the multiple method receives a higher weight than for the objectified value.

Germany and Austria have thus renewed their standards almost simultaneously, but in different directions. Germany sharpens roles and plausibility review. Austria extends the measures of value and moves closer to the market.

Feature	IDW S 1 i.d.F. 2026 (DE)	KFS/BW 1 (2025) (AT)
Adoption	11.02.2026	06.11.2025
Application	published in IDW Life 04/2026; earlier reference dates after express agreement	Acceptance of engagement from 30.06.2026
Focus of the new version	Roles, plausibility assessment, plausibility-checked decision value	new measures of value, market value and standardised subjective value
Role of multiples	Plausibility check	weighted higher for market value

For cross-border cases in the DACH region this means: the applicable standard depends on the registered office and the occasion. For tax and corporate law questions, bring in a tax advisor or auditor. This article puts matters in context; it does not replace advice in the individual case.

Those who want to look up the terms from valuation reports will find them in the M&A glossary.

For a first order of magnitude outside a formal expert valuation, a first value indication without an expert report in the company value calculator is sufficient.

Frequently asked questions

Is IDW S 1 legally mandatory?

No. IDW S 1 is a professional standard, not a statute. In court and expert practice in Germany, however, it is regarded as the recognised yardstick, in particular in compensation and squeeze-out cases.

Which version of IDW S 1 currently applies?

IDW S 1 i.d.F. 2026, adopted on 11 February 2026 and published in IDW Life 04/2026. For valuation dates before publication it may be applied if this is expressly agreed in the engagement.

What is the difference between IDW S 1 and KFS/BW 1?

IDW S 1 applies in Germany, KFS/BW 1 in Austria. The methodology is similar. Since the 2025 new version, KFS/BW 1 additionally recognises the measures of value market value and standardised subjective value, which distinguishes the standard from the German approach in details.

Which market risk premium applies in 2026?

Since its resolution of 16.09.2025, the FAUB recommends a range of 5.25 % to 6.75 % before personal taxes and 4.5 % to 5.75 % after personal taxes. Previously the recommendation before personal taxes was 6 % to 8 %.

Does IDW S 1 deliver the price I achieve on a sale?

No. The objectified value under IDW S 1 is a neutral reference value. The actual purchase price arises in the negotiation and depends on the decision value of the specific buyer, which can be higher or lower.

Capitalised earnings value or DCF, which method is better?

Both are equivalent under IDW S 1 and, with identical assumptions, lead to the same result. The choice depends on the available data and on what is customary in the respective context, not on any superiority in substance.

When do I need an IDW S 1 expert valuation at all?

Above all for occasions that require a neutral value basis: squeeze-out, compensation, mergers, corporate law or inheritance law disputes. For pure sale preparation, such an expert valuation is often not the suitable approach.