Net asset valuation
A net asset valuation establishes value as the fair value of a business’s assets — plant, equipment, stock, property and identifiable intangibles — less its liabilities.
It is the right method for asset-heavy businesses, loss-making entities and businesses being wound up, and it is the cross-check that sets the floor in almost every other engagement. Because Asset Valuations Group values property, plant and equipment in-house, that asset schedule is evidenced by a valuer rather than lifted from a depreciation register.
Step by step
How a net asset valuation is built
The difference between a good and a poor net asset valuation is whether anyone actually valued the assets.
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01
Establish the premise of value
Going concern, orderly liquidation or forced sale. The same assets produce materially different numbers under each, so the premise is set at the outset and stated plainly in the report.
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02
Value the tangible assets
Plant, equipment, vehicles, fit-out, stock and property assessed at fair value by a Certified Asset Valuer — not carried at written-down book value, which after a few years bears little relation to market.
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03
Identify and value intangibles
Registered intellectual property, software, licences, registrations, contract rights and customer lists valued separately where they are identifiable and transferable.
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04
Deduct liabilities and adjust
Interest-bearing debt, chattel mortgages and hire purchase, employee entitlements, provisions and contingent liabilities — including finance secured against the very assets being valued.
Honest scope
When this method fits — and when it does not
Use it when
- The business holds significant plant, equipment, stock or property
- Earnings are negative, marginal or below asset backing
- The entity is an asset-holding trust or investment company
- A court, lender or the ATO needs an evidenced asset position
Look elsewhere when
- The business is profitable and value clearly exceeds its assets
- The main value is goodwill and customer relationships
- The business is asset-light — services, software, agencies
- The purpose is a sale where earnings drive the price
Worked example: a transport operator
The depreciation register carries 22 prime movers and trailers at a written-down value of $1.4 million. Inspected and valued at market, the fleet is worth $2.35 million — the register reflects tax depreciation rates, not the second-hand market for well-maintained equipment.
Against that sits $980,000 of chattel mortgage and hire purchase secured on the fleet, plus $260,000 of employee entitlements. Stock, spares and debtors are assessed separately, and two vehicles held off-register are added.
A net asset position nearly $1m above book — and a defensible floor for the earnings valuation
Illustrative only. Every engagement is scoped to the specific business, its records and the purpose of the valuation.
What we need
Inputs for this valuation
This is the most document-driven method. The more complete the asset records, the tighter the conclusion and the lower the fee.
Open the document checklist →- Asset and depreciation register With acquisition dates, cost and written-down values
- Finance and lease agreements Chattel mortgages, hire purchase, equipment leases
- Stock and spares listing With ageing, so obsolescence can be assessed
- Property details Titles, leases, valuations and outgoings
- Aged debtors and creditors As at the most recent month end
- Provisions and contingent liabilities Entitlements, warranties, disputes and make-good
Because book value reflects accounting and tax depreciation policy, not market value. Equipment written down over five years for tax may hold most of its value in the second-hand market, and stock carried at cost may be unsaleable. A balance sheet is where the analysis starts, never where it ends.
For significant plant, equipment and property, yes. Inspection is what separates an evidenced asset schedule from a spreadsheet exercise, and it is the first thing an opposing expert or an ATO reviewer will ask about.
Going concern assumes the assets keep working together in a trading business. Orderly liquidation assumes they are sold individually over a reasonable period, and forced sale assumes a compressed timeframe. The same fleet can differ by 30 per cent or more across those premises.
No. Net asset value covers identifiable assets less liabilities. Goodwill is the residual between total business value on an earnings basis and the net tangible assets — which is precisely why the two methods are run together.
A Certified Asset Valuer within Asset Valuations Group. Because it is done in-house within the same engagement, you do not need to commission a second firm and the asset schedule is consistent with the rest of the valuation.
Reviewed by a Certified Practising Valuer
Reviewed by Jarrad Khoury, Director and Head of Valuations — Registered Valuer (QLD, Not Limited), Licensed Valuer (WA, Not Limited), CPV and CBV. Published by Business Valuations Brisbane, the business valuation division of Asset Valuations Group.
Last reviewed
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