APES 225: The Standard Behind a Business Valuation That Holds Up | IBV™

APES 225 is the Australian professional standard that binds the members of the professional bodies which have adopted it — and which others, including IBV™, follow voluntarily. It sets out how a valuation must be prepared, what must be agreed with you before work starts, and what a written valuation report has to tell you.

It is issued by the Accounting Professional & Ethical Standards Board (APESB). The current version was revised in October 2024 and applies to valuation services commencing on or after 1 January 2025.

The standard does not tell a valuer what your business is worth. It tells them how to go about reaching a number, and how honest the reporting has to be about the work behind it.

Most people comparing valuation quotes are looking at price and turnaround. APES 225 gives you a third test that is more useful than either: it lets you ask what you are actually buying, and whether the valuer works to a framework that binds its members.

Two reports can carry the same figure and represent very different amounts of work. One may be a full valuation where the valuer chose the methods themselves and tested them against the evidence. The other may be a narrower piece where you and the valuer agreed the method in advance, or where access to information was restricted. Both can be perfectly legitimate. What matters is that you know which one you are receiving, and that the report says so plainly.

That is the practical value of APES 225: it forces the type of work, the limits, and the reasoning onto the page, so a number cannot arrive without its context. Members of the bodies that adopt the standard have no choice in the matter; you get to see the discipline in the report.

The standard recognises three ways a valuation engagement can be structured. The difference is not quality in a simple sense; it is who decides the method, and how much freedom the valuer has.

One rule is worth knowing. If a valuer starts on a full Valuation Engagement and then discovers a limitation that could materially affect the estimate — records are unavailable, a key customer will not confirm its position — the engagement becomes a Limited Scope Valuation Engagement. That change has to be disclosed. It is not something a valuer quietly absorbs into the fee.

Both are described in the standard as an estimate of value, and either may be a single figure or a range. The label tells you which type of work produced it, which is why the wording at the front of your report is worth reading before the number itself.

A Calculated Value is not a lesser answer to the same question. It answers a narrower one, because the method was agreed rather than independently selected. If you later need the figure for a purpose that demands more — a tax position, a buyout negotiation, a settlement — the question to ask is whether the engagement you commissioned was capable of addressing that purpose, not whether the valuer could have tried harder.

This is the part of the standard that most directly protects you. For members required to comply with APES 225, paragraph 5.2 specifies the information that a written valuation report must communicate. These requirements also provide a useful benchmark for assessing reports prepared by valuers who voluntarily align with the standard. Read any valuation you receive against this list:

• Who commissioned it, and what exactly was valued — the business, a particular ownership interest, or a specific asset
• The valuation date, and the date the report was issued (these are rarely the same day)
• The purpose it was prepared for — and, as good practice consistent with our engagement terms rather than an express requirement of the standard, who may rely on it
• The name and qualifications of the person responsible for the valuation
• The scope, including any limitations or restrictions
• The basis of value used, and its definition
• The premise of value — for example, that the business continues as a going concern rather than being wound up
• Whether the valuation was performed independently
• The approaches and methods applied, and a description of how they were applied
• The information relied on, and how far it was reviewed — documents examined, people interviewed, reports of other experts relied upon
• The material assumptions and the reasoning behind them
• The Conclusion of Value or Calculated Value, and every qualification that materially affects it
• For a limited scope or calculation engagement, the notice that a full engagement could have produced a different result
• Confirmation that the fee was not contingent on the outcome, where independence was required or claimed
• A statement that the service was conducted in accordance with the standard

A report that answers these questions is easy to test. One that does not leaves you defending a figure you cannot explain — which is exactly the situation a valuation is supposed to prevent. Our guide to how to read a business valuation report walks through where each of these appears in a real document.

The standard defines independence in two parts: independence of mind — actually being free to reach a conclusion without influences that compromise judgement — and independence in appearance, which asks whether a reasonable outsider watching the arrangement would have concerns.

Two consequences follow, and both are useful tests when you are choosing a valuer.

A valuer who is required to be independent, or who presents themselves as independent, must not act as an advocate for your position. The role is to assess the evidence and report what it supports, not to build the case you would like to run.

A contingent fee is prohibited where independence is required or claimed. A fee calculated on the outcome — a percentage of the value reached, or a share of what a sale achieves — puts the valuer's earnings inside the result they are supposed to be measuring.

This is one reason IBV™ works on a Fixed Professional Fee agreed in writing before work begins. Nothing we are paid rises or falls with the figure we reach. You can see how our fees are structured on the fixed fee business valuation page.

It is as useful to know the standard's boundaries as its requirements — including who it binds (members of three professional bodies) and what it leaves to others.

It is not an audit of your business. A valuation does not independently verify all underlying financial information or provide audit assurance. However, where APES 225 applies, it requires the valuer to gather sufficient appropriate evidence through inspection, inquiry, computation and analysis, exercising professional judgement appropriate to the engagement. The report must disclose the information relied upon and the extent to which it was reviewed. If you need assurance that the numbers are correct, that is an accounting engagement, not a valuation.

It does not apply identically to every Australian valuer. APES 225 binds members of the professional bodies that have adopted it — Chartered Accountants Australia and New Zealand, CPA Australia and the Institute of Public Accountants — within its scope. A valuer who is not a member of those bodies may still follow the standard's principles voluntarily, as IBV™ does. Ask what framework a valuer actually works to, rather than assuming one.

It does not decide your tax. A valuation prepared for a tax purpose supplies the value at the relevant date. Whether a concession applies, and how the figure is treated, are questions for your tax adviser.

It does not guarantee acceptance. Preparing a report to a recognised framework makes it more likely a reviewer can follow and test the reasoning. It does not oblige the ATO, a court, a bank or another party to accept the conclusion.

1. Which type of engagement is this — a Valuation Engagement, a Limited Scope Valuation Engagement, or a Calculation Engagement?
2. Will the report present a Conclusion of Value or a Calculated Value, and why that one?
3. What is being valued exactly: the whole business, equity after debt, or a particular shareholding?
4. Who is permitted to rely on the report, and for what purpose?
5. How is your fee calculated, and is any part of it linked to the value reached or the outcome of a transaction?

A valuer working to a recognised framework answers those five questions in writing, without hesitation. If the answers are vague, the gap will still be there when the report arrives. If you are still deciding who to instruct, our guide to choosing a business valuer sets out what to check.

IBV™ voluntarily aligns its process and reporting with the relevant principles of APES 225 — engagement terms set out in writing, independence assessed for the particular matter, evidence gathered to support the conclusion, and reporting that discloses scope, assumptions, methods and limitations. That voluntary alignment is different from the mandatory obligations that apply to a member of a professional body, and we describe it that way deliberately.

Valuations are led by Dr Patrick Hillenbrand, an AVI Certified Business Valuer — a designation issued by the Australian Valuers Institute, which is not a government licence and is not a claim of Chartered Accountant status. Our written Engagement Letter names the engagement type, the permitted reliance, the Fixed Professional Fee and the timing before work begins.

The broader picture — how APES 225 sits alongside ethics standards, engagement terms and international valuation standards — is covered in our professional standards guide, which also explains what voluntary alignment means in practice.

• APESB — Valuation Services (APES 225, APES GN 20, APES GN 21)
• APES 225 Valuation Services, revised October 2024 (PDF)
• APESB — APES 110 Code of Ethics for Professional Accountants
• APESB — APES 305 Terms of Engagement

Frequently asked questions