Are Berkus and Scorecard Acceptable to a Professional Valuer?
No, not for a formal valuation report. That answer is worth being precise about, because the reason is not opinion, it is that three separate, independent sources, an accounting standard, a tax rule, and case law, all draw the line in the same place.
The Question, Precisely
Berkus, Scorecard, and Risk Factor Summation are genuinely useful tools, covered in Startup Valuation Methods: Deal Heuristics vs. Fair Value Reporting. The question here is narrower: could a registered valuer, or a Chartered Accountant, actually use one of these to certify a number for a Companies Act filing, a Rule 11UA computation, or a SEBI-regulated valuation. Three independent sources answer this the same way.
ICAI Valuation Standard 103 Recognises Exactly Three Approaches
ICAI VS 103, Valuation Approaches and Methods, sets out the Income Approach, the Market Approach, and the Cost Approach as the recognised framework, each with its own named methods underneath it, covered in full in Valuation Approach vs. Valuation Method: What the Words Actually Mean.
- Income Approach: converts future cash flows or income to a single present value. DCF sits here.
- Market Approach: derives value from actual market prices or historical transactions, comparable companies or comparable deals.
- Cost Approach: values an asset by what it would cost a market participant to recreate it, adjusted for obsolescence.
Berkus assigns fixed dollar amounts to five qualitative factors. Scorecard and Risk Factor Summation adjust a peer-group average by a weighted checklist. None of the three discounts a cash flow, derives from an actual transaction, or prices a replacement cost. They do not sit inside any of the three approaches. They sit outside the framework entirely, which is a different thing from being a weak version of one of them.
Rule 11UA Names a Closed List, and It Is Not on It
As covered in Angel Tax Is Abolished. Rule 11UA Isn't, Rule 11UA's own menu is specific and closed. For residents, it is the net-asset-value formula or DCF. For non-resident investors, under the sub-rule added by CBDT Notification 81/2023, it extends to five more: the Comparable Company Multiple Method, the probability-weighted expected return method, the option pricing method, the milestone analysis method, and the replacement cost method.
Every one of those five is a recognised professional technique, most of them covered directly in the Startup Valuation Methods piece as part of the IPEV Guidelines. None of them is Berkus, Scorecard, or Risk Factor Summation. The rule did not forget these heuristics. It named a specific, closed list of alternatives to DCF and NAV, and chose not to include them.
Case Law Protects the List, Not Whatever the Assessee Picked
ITAT and Delhi High Court rulings on Rule 11UA valuations establish a specific, narrow protection: once an assessee has chosen a method from the Rule's own list, typically DCF or NAV, the assessing officer cannot override it with a different method from that same list unless the assumptions used are shown to be patently erroneous or made in bad faith. Projections are judged against what was known at the time, not against how the company actually performed later.
That protection is doing real work, but it is anchored to the Rule's own list. It is a statement about which of the Rule's prescribed methods a taxpayer gets to pick, not a general endorsement of any method that seems reasonable. A valuation built on Berkus or Scorecard has no equivalent foothold to defend itself with, because there is no rule text naming it in the first place.
So What Are They Actually For
None of this makes Berkus or Scorecard bad tools. It places them correctly. They exist to give an angel investor and a founder a number to start negotiating from, before any product, revenue, or audited balance sheet exists to build a proper Income or Market Approach on. That is a real, useful function, and it happens before a professional valuer is typically in the room at all.
The moment a number needs to survive a Companies Act filing, an Assessing Officer's scrutiny, or a SEBI-regulated process, the applicable framework is Income, Market, or Cost, using the specific methods each recognises: DCF, comparable transactions, replacement cost, and, where the transaction calls for it, the more specialised techniques covered in the Startup Valuation Methods piece, Calibration to a recent investment, scenario analysis, the option pricing method. A negotiating heuristic and a certified valuation are different documents, built for different moments in the same company's life, and only one of them is meant to hold up under scrutiny.