The cost approach is normally accorded a lower status for going concerns, but Andrew Strickland advises valuers to think twice given the current crisis. ‘This Cinderella of business valuation approaches is likely to make it to the ball when we start to count the economic cost of the present crisis,’ he says in this month’s issue of Business Valuation Update. ‘There may be many situations in which reduced profits mean that business valuers must remember to cross-check values to those the cost approach gives.’
Strickland gives particular notice to ‘the flightiest and most flimsy assets’; using the cost approach with intangibles and how these fit within the IVS 2020 definition; and application of the cost approach summary method.