Businesses or fractional interests in businesses may be valued for various purposes such as mergers and acquisitions, sale of securities, and taxable events. An accurate valuation of privately owned companies largely depends on the reliability of the company's financial information. Public company financial statements are audited by Certified Public Accountants (US), Chartered Certified Accountants (ACCA) or Chartered Accountants (UK and Canada) and overseen by a government regulator. Private companies do not have government oversight and are generally not required to have their financial statements audited. Private company financial statements are commonly prepared to minimize taxes by lowering taxable income and the financial information may not be accurate. Public companies tend to want higher earnings to increase their share prices. Inaccurate financial information can lead to over- and undervaluation. In an acquisition, due diligence is commonly performed by the buyer to validate the representations made by the seller. Financial statements prepared in accordance with generally accepted accounting principles (GAAP) usually express the values of the assets at their costs rather than their higher market values. For example, the balance sheet would reflect a piece of land at the purchase price rather than its appreciated value. Certain types of assets and liabilities such as securities held for sale will be reflected at their market values rather than their costs so that the company's financial information is more meaningful. This process is called "mark-to-market" but is subject to manager bias who may be compensated more with higher values. An extreme example of a company taking advantage of mark-to-market accounting to pump their own share price was Enron.
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