As 2014 draws to a close, we look back on the developments that have come out of the business valuation industry this year—one of which was, of course, Business Valuation Australia’s own launch in July!
That launch meant we were there to report on the developments, achievements, and insights that have emerged in our increasingly outward-looking industry, and we look forward to connecting the dots as we continue our coverage in 2015.
See you next year: This will be our last e-zine of the year; BVWire–Australia will be on break on 1 January to celebrate the new year and will commence on 15 January 2015.
CAANZ’s launch of the CA BV accreditation
A major event for the business valuation industry this year was the launch of the Chartered Accountant (CA) business valuation (BV) specialisation program. Chartered Accountants now have the opportunity to build on their skills, knowledge, and experience and be formally recognised through the CA BV specialisation program.
As outlined by CA ANZ's Specialisation Manager Jan Jackson in BVWire—Australia 1 August, the specialisation program exists to create an environment that:
- Provides employers, clients, investors, and regulators with a greater level of confidence that people who are educated and experienced undertake business valuations;
- Facilitates the professional competence of members in business valuation skills and knowledge;
- Enhances personal promotion and introduces a key point of difference; and
- Promotes a network of preeminent business valuation specialists.
Chartered Accountants may pursue two pathways to become business valuation specialists: post-graduate studies or the workshop and assessment education component. For the former, members must have at least two years of practical business valuation experience; for the latter, at least four.
As a CA BV specialist, you will:
- Receive a certificate recognising your specialisation;
- Be able to demonstrate your skills, knowledge, and experience to clients;
- Build on your existing CA learning;
- Use the descriptor “CA BV Specialist”;
- Be included in the list of CA BV specialists on the CAANZ website; and
- Be included in Find a CA on charteredaccountants.com.au (if you are a CPP holder).
Find out how to apply to become a CA BV specialist here.
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IIBV/ASA business valuation courses available for the first time in Australia
This year the International Institute of Business Valuators (IIBV) started offering local courses that count towards the American Society of Appraisers (ASA) business valuation certificate and the intangible asset appraisal specialty, courses that were previously available only in South Korea, Brazil, and Serbia. The first training courses, including IIBV103-BV Case Studies and ASA204 Advanced Topics, were held in Melbourne only a few weeks ago.
David Crick, ASA Australia chapter president, said in BVWire—Australia 1 August that the decision to move forward with training in Australia was to fill the needs of business valuation practitioners who wanted to get involved in the ASA, an organisation that had until recently been dominated in Australia by valuers of machinery and equipment.
Further, his colleague, Bob Morrison, BV trainer and contributor to Business Valuation Australia’s October edition, observed that many Australian valuers—even those who had been in the industry for ages—were happily surprised to be confronted by complexities they had not encountered before. This further underlined the need for intangibles training in Morrison’s mind.
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The 2014 Business Valuation and Forensic Accounting Conference reflects evolving industry
The one-stop shop for industry practitioners to network and hear from leading business valuation experts—the 2014 Business Valuation and Forensic Accounting Conference in October—brought more interesting trends to the surface.
As observed by organiser and PwC partner Richard Stewart in the October edition of Business Valuation Australia, the local business valuation industry is attracting more professionals as well as international involvement—a pattern reflected by the international speakers at the conference and Stewart’s own talk, which included findings across seven countries.
Mel Abraham’s inclusion in this year’s conference program echoed this sentiment, adding an inspirational aspect to an industry typically preoccupied with calculations and theories. A California native, Abraham shared his own experiences to encourage business valuation practitioners to aim to become thought leaders as a way to take control of the conversation and be relevant to their marketplace.
Commenting on the increasing internationalisation of the Australian business valuation industry, conference organiser Stewart said: “Our industry has very much been focused on local standards. As the business valuation industry becomes more intimately entwined with international accounting standards, practitioners will need to become familiar with them.”
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Release of APES GN 20 Scope and Extent of Work for Valuation Services
Although not strictly a 2014 event, the release of the Accounting Professional & Ethical Standards (APES) board’s APES GN 20 Scope and Extent of Work for Valuation Services greatly shaped the industry this year.
APES GN 20 provided guidance to assist business valuation practitioners on the application of APES 225 Valuation Services in determining the scope and extent of work that, depending on particular circumstances, may be appropriate for the three types of valuation services below:
Type of Valuation Service |
Extent of Work |
Extent of Evidence Obtained |
Valuation engagement |
Limited to extensive use of valuation approaches, methods, and procedures. |
Evidence obtained for significant matters. |
Limited scope valuation engagement |
Minimal to limited use of valuation approaches, methods, and procedures. |
Limited evidence obtained for significant matters. |
Calculation engagement |
No to minimal use of valuation approaches, methods, and procedures. |
Little or no evidence obtained for significant matters. |
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Taking the mystery out of embedded brand values on a global scale
How do you value a brand that’s intertwined with all of the other assets of the company? This is a phenomenon that’s not well understood. Fortunately, research reveals how brands are valued in an actual acquisition.
New data: In 2013, a consortium of Berkshire Hathaway and 3G Capital acquired H.J. Heinz. The brand value was reported as worth $12.1 billion, which represented 40.5% of enterprise value, according to a new report, “Global Top 20 Brands in 2013,” from Markables. The rankings in the report represent brand values that follow international accounting and financial reporting standards. Plus, they were calculated by independent certified appraisers, audited by CPAs, and now appear on the balance sheets of the acquirers. Some of the other famous brands in the Top 20 list include:
|
Brand Value
($ Millions) |
% of Enterprise
Value |
Sprint |
$6,455 |
11.8% |
Crown (Corona beer) |
2,306 |
32.6 |
Sealy |
524 |
40.9 |
Kayak |
496 |
26.5 |
Saks Fifth Avenue |
374 |
11.5 |
Wish-Bone |
348 |
60.4 |
Skippy |
265 |
39.8 |
Key ratios: The 2013 Top 20 brands accounted for 34.3% of all assets of these enterprises (including other intangibles, goodwill, plant and equipment, inventory, and receivables). The figure is in line with previous years. The average brand premium of the Top 20 was 8.0% of net revenue in 2013. That is, 8% of revenue represents profit directly attributable to the brand. This figure is lower than in 2012 but higher than it was in 2010 and 2011.
Markables, a Swiss company, has a database of over 5,000 trademark valuations published in financial reporting documents of listed companies from all over the world. The database reports value solely for the use of trademarks (not bundled with other rights). It also contains trademark assets that have longer lives than is typical.
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Illustrative examples highlight revised book on valuing intangibles
A comprehensive resource for valuing intangibles has been revised and is now available. Robert Reilly and Bob Schweihs, Willamette Management Associates managing directors, wrote this new 700-page book, Guide to Intangible Asset Valuation. The authors take a broad approach, so the book is a valuable resource for novices and seasoned experts alike. The authors go through the basics of valuing intellectual property and intangible assets, and they provide detailed examples for each generally accepted valuation approach.
The book also covers topics such as due diligence procedures and measurement methods for economic damages; allowable intercompany transfer price analysis methods; intangible asset fair value accounting valuation issues, and much more.
The book is available from BVR. For more details, click here.
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Have you downloaded your issue of Business Valuation Australia?
Last but not least, if you haven’t subscribed to Business Valuation Australia (BVA), our quarterly journal for Australian and New Zealand business valuation practitioners, you are missing out. With BVA, you will keep up with the latest patterns and trends in business valuation, analysis of new methodologies, and regulatory and standards updates. Highlights of our latest issue include:
- “Valuer’s Q&A Corner”: Advice from Bob Morrison, ASA, who taught the International Institute of Business Valuators (IIBV) course in Australia earlier this year;
- Key valuation issues arising in family court, by Trevor Vella;
- Applying the size premium, by Matthew Ashby; and
- Five tips to enhance the valuation analysis, by Bob Morrison.
Subscribe ASAP! The January issue will be distributed on 19 January 2015. Highlights of the upcoming issue include a summary of the key takeaways from the recent Business Valuation and Forensic Accounting Conference as well as in-depth guidance on tax adjustments for claims adjustments, control issues in a legal context, and valuation regulation.
Learn more and subscribe today.
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