Types of business valuation services in Australia
APES 225 Valuation Services indicates that the following three types of business valuation services can be provided by qualified Australian accountants, members of professional bodies such as CPA Australia or Chartered Accountants Australia and New Zealand:
Valuation Engagement – a comprehensive business valuation service where the business value is determined by applying valuation approaches, methods and procedures “a reasonable and informed third party would perform taking into consideration all the specific facts and circumstances available at that time”. This type of business valuation is often required by law for taxation purposes; family law, shareholder and other disputes.
Limited Scope Valuation Engagement
Limited Scope Valuation Engagement (also referred to as a “restricted-scope valuation engagement” or an “indicative valuation engagement”) – a business valuation service where the scope of work is limited or restricted (due to a limited client’s budget or insufficient available information, for example) and the valuer is not free to employ the valuation approaches, methods and procedures that “a reasonable and informed third party would perform taking into consideration all the specific facts and circumstances available at that time”. The limiting conditions may be discussed and agreed upon before the valuation service start or can be discovered during the course of the service.
Calculation Engagement – a business valuation service where the valuer and the client agree on the valuation approaches, methods and procedures the valuer will employ. This may involve agreements on usage of predetermined discount rates, valuation multiples, number of valuation methods, etc.
Provision of each of the above business valuation service types requires different levels of time and expertise from the valuer and therefore can be priced differently.
By Julia Podgorbunskaya, CPA, Senior Business Valuer at Professional Business Valuers
(61) 02 4295 0079