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A certified valuer will listen to your situation and answer any questions you may have, at no cost.
Level 3 fair values, impairment tests and acquisition accounting prepared for the auditor's working papers, for Melbourne boards, finance teams and fund managers reporting under Australian Accounting Standards.
Indicative valuations from A$799. Certified Summary and Detailed reports from seven business days.
A financial reporting valuation supplies an accounting estimate that the auditor will test under ASA 540. For Melbourne reporting entities that means the fair value of an unlisted investment under AASB 13, the recoverable amount of a cash-generating unit under AASB 136, a purchase price allocation under AASB 3 or the grant-date value of employee awards under AASB 2.
A set of financial statements contains several numbers that are judgements rather than records: what an unlisted investment is worth, whether the goodwill from last year's acquisition is still supportable, which intangible assets were actually bought, and what the options granted to staff cost. Every one of them rests on a valuation, and every one is tested by the auditor under ASA 540, the standard on accounting estimates. For a board in Docklands or a finance team in Southbank signing off a year-end pack, that testing gets more demanding each cycle.
A weak estimate does damage well beyond the audit file. A fund that carries a Cremorne software investment at an inflated fair value reports returns it has not earned and charges fees on them. A goodwill write-down that should have been booked a year earlier overstates profit until it lands, and when it lands it can trip a covenant with the bank. An acquisition of a Dandenong South manufacturer booked with the whole premium in goodwill, instead of allocated to customer contracts, brand and technology, carries the wrong amortisation and the wrong impairment base for years.
ASIC's financial reporting surveillance has for years listed impairment of non-financial assets and the values placed on unlisted assets among its focus areas, and the same questions reach unlisted companies through their auditors and their lenders. Whether the reader is an audit partner on Collins Street, the audit committee of an ASX-listed small cap, a private equity manager or a not-for-profit board that reports to the ACNC, the standard expected of a Level 3 estimate does not change.
We prepare these valuations for CFOs, audit committees, fund managers and the auditors who test their work. Each engagement is organised around the questions the auditor will put, because a valuation that cannot survive that conversation has not done what it was bought for.
A certified valuer will listen to your situation and answer any questions you may have, at no cost.
Most financial reporting valuation work comes from four standards. Each poses a different question, measures on a different basis and is tested by the auditor in a different way.
Fair value is the exit price: the amount a market participant would pay for the asset, or accept to assume the liability, in an orderly transaction on the measurement date. Inputs sit in three levels, and nearly every private company holding is Level 3, where the reporting entity's own assumptions drive the answer and the disclosure burden is heaviest. A recent arm's length funding round anchors the value, but it is calibrated and rolled forward rather than copied into the next set of accounts.
Goodwill and indefinite-life intangibles are tested annually; other assets are tested when an indicator appears, and a market capitalisation below net assets is one. The test compares the carrying amount of a cash-generating unit with its recoverable amount, the higher of value in use and fair value less costs of disposal. Value in use is built from board-approved forecasts, normally no longer than five years, on the assets as they stand today, discounted at a pre-tax rate.
After an acquisition, the price paid is spread across the identifiable assets and liabilities at fair value, including intangibles the target never recorded: customer relationships, brand, technology, order book, restraint covenants. Goodwill is only what is left over. An earn-out or other contingent consideration is recognised at fair value on the acquisition date and, if it is a liability, remeasured through profit or loss until it is paid.
Options and performance rights granted to staff are measured at fair value on the grant date and expensed over the vesting period, using an option pricing model. How that accounting value differs from the employee's tax value under Division 83A, and what it means for a Melbourne growth company, is covered on our employee share scheme page.
Two AASB 9 issues turn up at businesses that would never describe themselves as holders of financial instruments. A convertible note the company has issued to investors may have to be split into a debt component and an equity or derivative component, with the derivative remeasured every reporting date. Trade receivables need an expected credit loss allowance under the simplified approach, which means a provision matrix built from the company's own loss experience and adjusted for current conditions, not a flat percentage of the ledger.
AASB 13 fair value work begins with enterprise value. We use the market approach, with multiples from listed peers and comparable transactions, and the income approach, with a discounted cash flow, as far as the company's stage and the available data allow. That value is then allocated across the share classes through a waterfall, an option pricing method or a backsolve to the most recent round. Where the fund invested recently, the model is calibrated to reproduce that price on that date, and the inputs are then moved for what has changed since: trading against plan, comparable multiples, milestones reached or missed. Debt and credit positions are valued on a yield basis against current market rates for similar risk, with enterprise value coverage as the check.
AASB 136 impairment work starts before the spreadsheet, with the cash-generating unit structure and the allocation of goodwill, because a unit drawn too widely lets a strong division carry a failing one and every auditor knows it. Value in use then follows the discipline the standard imposes: cash flows for the assets in their current condition, with expansion capital and uncommitted restructuring taken out, a terminal growth rate that can be defended against long-run evidence, and a pre-tax discount rate derived iteratively from a market-based post-tax weighted average cost of capital rather than by a simple gross-up. Where value in use is marginal we also prepare fair value less costs of disposal on market participant assumptions, because recoverable amount is the higher of the two and an entity that tests only one can write down an asset that was never impaired.
AASB 3 purchase price allocation identifies each intangible and applies the method that fits it: multi-period excess earnings for customer relationships, relief from royalty for brands and technology, a with-and-without comparison for restraints, replacement cost for the assembled workforce as a contributory asset. The results are reconciled so the implied return on each asset is consistent with the return on the deal as a whole, which is exactly the test the auditor applies. The same analysis feeds the first impairment test and the tax cost setting work. Sensitivity and headroom analysis is prepared in the format the notes require, so it drops straight into the disclosures instead of being reverse-engineered at year end.
These are the findings that turn a routine audit into a qualified opinion, a restatement or correspondence with ASIC.
Financial reporting valuations are written for an auditor, and often for a regulator behind the auditor, so the work almost always sits at the certified end. The exception is the planning stage, when a board wants to know whether an impairment is coming, or what a proposed acquisition would do to the balance sheet, before it commits.
The report is ordered the way the auditor works: the accounting question being answered, the unit of account, the measurement date, the information relied on, the method and why it was chosen, each input with its source and date, the calculation, the sensitivity analysis and the disclosure schedule. Judgements are explained in words at the point they are made, so a reviewer on Collins Street does not have to reconstruct them from the model.
A certified valuer signs every report and will take the auditor's questions directly, walk the audit committee through the sensitivities and defend the conclusion if it is challenged. We plan the work around your close timetable and coordinate with your finance team and your auditor from the outset, because a valuation that arrives after the numbers have been signed off is an argument, not evidence.
If the auditor throws out one assumption in this valuation, does the conclusion move, and do we already know by how much? A report that cannot answer that question has not been sensitised.
Talk your situation through with a certified valuer before you commit to anything, at no cost.