Where the worth of a business sits in its machinery, its trucks or its freehold rather than its goodwill, the questions are what those assets would sell for and what is owed against them.
The asset approach values a Brisbane business as everything it owns less everything it owes, with each line moved from its figure in the accounts to what it would sell for today. It leads for plant-heavy and thin-margin operators, holding companies and businesses being wound up, and it provides the floor under every other valuation.
Each asset and liability moves from its book figure to its market value: land and buildings, plant and vehicles, stock, debtors, contingent liabilities and the tax that would be payable on any gain. The difference between book and market is the substance of the method. A press brake in an Acacia Ridge workshop that was fully depreciated years ago still has a resale price, while a prime mover bought on finance last year may be worth less than the loan against it.
The tangible assets are valued first, and any earnings beyond a fair return on them are then capitalised to give a figure for goodwill. It sits between asset-based and earnings-based thinking and is used with care, its assumptions written out, because a small shift in the assumed fair return moves the goodwill figure a long way.
A business that keeps trading should be worth at least what its assets would bring, so the adjusted net asset figure is worked out on every engagement, not only where it leads. If an earnings-based result comes in under it, the report says so directly, because that usually means the business is not earning a fair return on the capital it uses, and a buyer would prefer the assets to the business. In a shareholder dispute before the Supreme Court of Queensland, that comparison is often one of the first things the opposing expert tests.
Take an illustrative structural steel fabricator in Acacia Ridge. Its asset register carries a press brake, a plasma cutter and a beam line at a fraction of what they would sell for, while the factory freehold, held in the same company, has not been revalued since purchase. A specialist plant and machinery valuation replaces the book figures with market ones, the property is valued on its own industrial sales evidence, and equipment finance, chattel mortgages and any balloon payments are deducted in full on the way from enterprise value to equity value. If the freehold stays in the company and the shares are sold, the valuer notes that the buyer may be liable for landholder duty under the Duties Act 2001 (Qld), assessed by the Queensland Revenue Office, as a matter for the accountant to factor into the deal structure rather than an adjustment to the value of the assets.
A freight operator on the Australia TradeCoast near the Port of Brisbane raises the same questions in another form: prime movers and trailers valued at what the used market would pay rather than at written down value, the depot lease or freehold at Pinkenba or Eagle Farm, and the finance sitting behind nearly every vehicle. Any contracted work is then tested on the income approach to see whether it supports goodwill above what the fleet would realise.
Businesses heavy in plant or thin on margin: fabricators and food processors in Acacia Ridge, Rocklea and Yatala, freight and warehousing operators across the Australia TradeCoast, Wacol and around the Port of Brisbane, civil contractors busy in Ipswich, Logan and Moreton Bay, along with property and investment holding entities and any business being wound up.
The income approach is still applied to each of these to see whether the earnings justify anything above the net asset figure, and the market approach is used wherever sales evidence exists. The report explains why the asset result carried the most weight, or why it was overtaken.