Business Valuation Update
- How to Review a Report’s Valuation Methodology
- Ideas for Solving Two Problems in the BV Profession
- How Do Your Firm’s Benefits Stack Up?
- Using Rule of Thumb Data to Uncover Cooked Books
Scope of Work: What Constitutes Reasonable Grounds in a Valuation?
One of the most critical areas of professional judgement in a valuation engagement is the extent to which the information is assessed. While judgement is also required in the selection and application of the valuation methodology, in my experience, the major factors for the variance in disputed valuations are different assumptions with respect to the earnings or cash flows adopted and their related growth rates and risk. A properly prepared valuation is one where these assumptions have been based on a sound, appropriate analysis of the available information. But how much analysis is enough?
Pretax Versus Posttax DCF in Loss and Damage Calculations
Many in the Australian and international valuation community have challenged the accuracy and appropriateness of pretax discounted cash flow (DCF) analyses. Pretax DCF analyses continue to be used in practice, however, particularly in the context of calculating loss and damage when quantifying claims in commercial disputes.
Key Valuation Issues Arising in Family Law Valuation
The main body of legislation that deals with family law in Australia, including the division of property between separating spouses, is the Family Law Act of 1975. Challenges arise in many valuation engagements, and family law has its fair share, starting with the very nature of the entity to be valued.
Valuer’s Q&A Corner
Business Valuation Australia is pleased to offer the new column “Valuer’s Q&A Corner.” In each issue, BVA will answer your critical business valuation questions with tips and advice from BV thought leaders. Please email your questions to editorau@bvresources.com and look for responses in each issue of BVA.
2013-2014 IPO Market Analysis: Australia and New Zealand
S&P Capital IQ analyses the Australia and New Zealand IPO market to observe trends and market performance to provide key insight and perspective. The period 2013-2014 proved to be a strong IPO market. Of particular interest were the very positive performance of sponsor-backed IPOs and the negative performance of energy listings.
Conference Preview and Advice From BV Thought Leaders
The three-day 2014 Chartered Accountants Australia and New Zealand Business Valuation and Forensic Accounting Conference starts 27 October in Sydney. Business Valuation Australia interviewed two business valuation figures, Richard Stewart and Mel Abraham, who will take centre stage at the event. Both have a wealth of knowledge and experience to share.
What to Do About Applying Size Premia in Australia
The size premium is an important valuation issue for two reasons: (1) it is difficult to estimate; and (2) its inclusion in deriving a cost of capital can have a material effect on the outcome of a valuation assignment. This article provides an overview of the current status of the size effect and size premia in Australia, examples of cases from Australian courts and tribunals in which size premia have been considered, and the issues and challenges faced in estimating size premia within the Australian market.
Five Tips That Will Enhance Your Valuation Analysis
I recently had the honour of teaching two business valuation courses in Australia. The courses were offered by the International Institute of Business Appraisers (IIBV) and were sponsored by the Australian Chapter of the American Society of Appraisers (ASA).
Dealing With the Changes to the Thin Capitalisation Rules
On 8 May this year, the federal government issued exposure draft legislation proposing changes to the thin capitalisation rules. When passed, these changes can result in higher taxes for multinationals if not managed appropriately.
The Specific Risk Dilemma—Is It in the Eye of the Beholder?
How do you quantify company-specific risk in a discounted cash flow valuation? More specifically, how do you reflect the risk of anticipated new legislation or the possibility of delay in a new company project? In our experience, it is an important valuation consideration and is often something that a valuer has considerable difficulty in applying his or her judgement to assess.
IIBV/ASA Business Valuation Courses Offered in Melbourne
Big changes are in the air in the business valuation profession in Australia, beginning with the launch of the CA BV specialisation and accreditation process by the Institute of Chartered Accountants Australia (ICAA). Likewise, the International Institute of Business Valuators (IIBV) is offering courses locally that count toward the American Society of Appraisers (ASA) business valuation certification and the intangible asset appraisal specialty.
ICAA and Business Valuation: 10 Years and Counting
This is the 10-year anniversary of the Institute of Chartered Accountants Australia’s (ICAA) launch into the business valuation profession. Now, with the recent trans-Tasman amalgamation of the ICAA and the New Zealand Institute of Chartered Accountants to the newly formed Chartered Accountants Australia and New Zealand, what better time is there to look back at a bit of history and see how far we have come?
Using the Distributor Method to Value Customer Relationships
A common framework when valuing intangible assets of a business—such as brands, trademarks, and technology—is to use the relief from royalty method, combined with the multiperiod excess earnings method (MPEEM), to appraise customer relationships. This framework requires significant market evidence, especially at the asset level, because of the challenge of finding royalty indications that are directly comparable to the asset being valued. Therefore, in certain industries and situations, this framework may be highly subjective and, if applied in a mechanical manner, may provide a value conclusion that is inconsistent with a qualitative assessment of the entity and its underlying assets. As an alternative, in certain situations, we replace the company-specific margin with a market-based margin, as a reasonable market proxy, in an MPEEM. This method is commonly referred to as the distributor method (DM). The name is derived from the initial use of distribution companies as the market proxy. Subsequently, extensions have been developed for other situations.
Australian Airport Values—Flying High
Investments in Australian airports over the last decade have proven to be winners, with many of Australia’s largest institutional investors (and superannuation funds) benefitting from strong capital growth and stable dividend yields.
Asset Impairments: Issues, Challenges, and Guidance
As reporting season nears, companies will be required to assess the value of their assets held on the balance sheet and potentially record impairments against such assets. This can occur for a number of reasons but is typically due to adverse market conditions or a change in the market’s perception of a particular industry. Businesses continue to face difficulty identifying whether these changes mean that an impairment should be recognised and how to appropriately test for such impairments. Whilst Australian Accounting Standards Board (AASB) 136 sets out the indicators to consider when assessing whether an asset may be impaired, with the aim of ensuring that a company’s assets are carried at no more than their recoverable amount, the actual application is more problematic.